CFS: Why are majors outsourcing?
CIFCMD: “Even with crude oil at closer to $100 a barrel, there was always debate in the oil majors about what to do with fuel cards. Is it really a core business? Are we any good at it? Shouldn’t we just fling the doors open to allcomers? Historically the argument was edged by those suggesting that the brand loyalty encouraged by a proprietary fuel card was worth continued investment. The fuel cards folder just about made it out of the “too difficult” drawer.
However, if you start trying to answer the same questions in a world of $50 oil, a different set of answers fall out of the model. Reduce costs to serve. Focus on core business. Be selective about target segments. Eradicate complexity. “Stick to the knitting”.
Consequently, the headlong rush starts to outsource vast chunks of the fuel cards value chain to somebody else, or to cobbled-together joint ventures of somebody-elses. Headcounts are reduced; capital is dis-employed, and business unit managers claim to have thought outside the box.
Have they?
CFS: Why are outsourced solutions providers growing so fast?
CIFCMD: “This may not sound particularly inspiring, but if you build a transaction processing platform, the best way to make it pay is to run lots of transactions through it. Providing it’s vaguely scalable and functionally fit for purpose, the more transactions you run through it, the more unit cost-competitive they become. Doh.
Same with sales and marketing. If you’ve got handy digital marketing capability, a half-decent CRM system and a robust set of back office processes – the best thing to do is serve lots and lots of customers with lots and lots of fuel cards. That should get the unit costs into just about the right shape for the next RFP, eh?”
CFS: What is the customer getting out of it?
CIFCMD: “Erm, can we move on to the next question please?”
CFS: Really? Surely the market is changing beyond recognition?
CIFCMD: “The thing is, it’s been said over and over again that the massive and continuing trend towards outsourcing is the big “tectonic shift” in the fuel cards marketplace. That it’s fundamentally changing the market dynamics and the competitive landscape.
Is it? Really?
What we have to ask ourselves is this: are commercial fleet buyers choosing between offers which are fundamentally different from before? Has the basis of competition truly changed? Have different buying preferences been recognised, and exciting new value propositions been engineered in response to them? Apart from a part of the value chain moving from one player to another, has anything vaguely disruptive happened at all?
In every case, the answer is “no”. “
CFS: So if outsourcing isn’t changing the market, what will?
CIFCMD: “The real disruption, the real change in competitive landscape will only be felt when new offers start to reflect the massive divergence in demands between Fleet and Commercial Road Transport customers.
Who will step in with an offer meeting the extreme control and restriction demands of tomorrow’s international transport firm? Who will answer the need for a professional fleet to integrate cost management across vehicle, fuel and driver? Will these be new entrants altogether – or do today’s players have sufficient reserves of initiative, imagination and commercial will to forge creative strategic alliances?
Customers tend to get what they want – so you’d imagine the game is on”.
With hypothetical thanks to the completely illusory former Cards Marketing Director for her/his/thoughts.
