THE BIG END of town has shown small and medium-sized businesses the way in how to get the most out of outsourcing and offshoring, professional services firm Deloitte’s sixth Reality of Growth Guide has found.
THE BIG END of town has shown small and medium-sized businesses the way in how to get the most out of outsourcing and offshoring, professional services firm Deloitte’s sixth Reality of Growth Guide has found.
For many large companies, cost management was originally a keymotivation. But there is more to it than that – especially as the net savings are more likely to be in the 25 to 45 per cent range, compared with optimistic studies showing raw cost savings of 45 to 55 per cent, according to The Conference Board.
In its report, Thinking Offshoring Through, The Conference Board found that as service improves, savings often become more significant. For small to mid size companies, cost cutting can be important; but “it’s about enabling fast growing companies to match the performance of large organisations without the expense and delay of acquiring expensive resources,”according to the Deloitte guide, Outsourcing: don’t throw the baby out with the bathwater.
The other advantages of outsourcing and offshoring highlighted by Deloitte include improved efficiency, internal control, risk management and access to technology or skills, previously not available due to cost or scale.
There is wide spread recognition that, compared with 10 years ago, successful outsourcing and offshoring has become a strategic and sophisticated process. In the current climate, it can free up much needed resources and deliver specific expertise and backroom support. “Australia is in the grip of what is probably the tightest labour market we’ve ever experienced,” Deloitte Growth Solutions partner, Jeremy Bolt said. “So it will become increasingly difficult for mid market companies to attract and retain the best people. They simply don’t have the profile and reputation to successfully compete with large successful organisations for the top talent.”
Outsourcing and offshoring can help smaller companies match the performance of large organisations without their having to invest in expensive resources. It can provide access to experience and expertise as and when needed, mitigate risk, and free up managers’ time so they can focus on company growth.
External staff also tend to perform well over time. Offshore employees, for example, “generally make fewer errors, handle transactions faster, take more initiative, and are eager to learn and get ahead,”according to Ton Heijmen, senior advisor to The Conference Board on offshoring and outsourcing.
Similarly, outsourcing can be a solution for smaller companies that don’t have the capital to invest in technology solutions needed to drive the business forward. “That’s why identifying and developing an enduring relationship with a good external provider is very much a growth enabler for the mid market,” Bolt said.
But companies wanting to offshore some IT services amid increased competitive pressures both in Australia and internationally have to watch their budgets. “Scope and service levels are the key determinants of price, but the actual quoted costs can vary widely from market to market – and the growth in some popular offshore destinations makes costs a moving target,” The Conference Board report said. Any outsourcing relationship has to be carefully structured and managed to make the relationship work.
How to make outsourcing work for you
1. Define the desired outcomes and how they will be measured
2. Check out provider thoroughly including references
3. Recognise the power of culture
4. Take into account the dynamics of a long term relationship
5. Get the contract right
6. Treat the provider ‘as one of us’
7. Manage the transition
8. Plan for how the relationship might end
Source: Deloitte’s Outsourcing: don’t throw the baby out with the bathwater
