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Is Outsourcing a Necessary Business Transformation?

February 2, 2012

The term ‘outsourcing’ has, until recently, been primarily associated with cost savings, especially in human capital. China and India are often mentioned as preferred outsourcing destinations for multi-national organisations and are cited as the most cost-effective; with big enterprises, mainly in manufacturing, moving whole operations as a way to increase profitability.

However, outsourcing an operation to offices on the other side of the world is not a viable choice for SMEs, or for organisations wishing to outsource just one or two business functions. A far better option for these cases is ‘nearshoring’, which still offers lower overheads than locally-based staffing, but has none of the distance or language pitfalls associated with offshoring.

Why outsource to begin with?

Outsourcing can be a crucial strategic direction for start-up companies to take. It is a common misconception that an organisation needs to be of a certain size to outsource … but consider the following benefits:

  • The capital of start-up organisations is limited. By outsourcing some of their functions, they can reallocate much-needed funds to business development and innovation. Cost savings are realised not only in lower salaries, but also in assets and overheads.
  • Embracing non-core, but necessary, business functions as a service, gives a competitive advantage to any business, which is vital for start-ups.
  • By having an outsourcing provider, start-ups can minimise risk significantly. They pay for the service, the provider takes care of the rest and there are no future maintenance costs for infrastructure.

The above benefits are, of course, relevant to any size of organisation. Companies that have already tried outsourcing are now increasingly opting for a more bundled approach, i.e. outsourcing a number of different functions to the same provider. This approach yields substantial savings and well-informed sourcing decisions are easier to make. With the current economic pressures, multi-process outsourcing allows organisations not only to save, but also to add value. Whether it is by increased service offerings or improved client flexibility, such intelligent business transformation may be imperative for outperforming the competition.

So, outsourcing is a low-risk, scalable, multi-service expansion of business that is cost-effective, transparent, and helps you reach your strategic goals … but there are many people who are still reluctant to welcome such an approach. Changing the nature of how a business runs is not easy and can be risky. Outsourcing, however, mitigates the fear of failure, providing a proven model for business expansion, transforming businesses globally.

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