Will outsourcing be the big business trend of 2016?

By in Business Trends

With Australia’s economic and business growth expected to remain flat for 2016 and potentially well beyond, companies are looking for new and sustainable ways to achieve efficiencies to drive the bottom line by outsourcing.

According to the most recent quarterly national accounts data released by the Australian Bureau of Statistics (ABS), Australia’s economy has slowed to 0.2% – the slowest rate in more than two years. At the same time, Roy Morgan Research’s Business Confidence Index fell to its lowest level in four-years in August, before recovering slightly in recent months.

It’s this uncertain and volatile business environment that has Business Advisory Director at William Buck, Chris Gebhardt, predicting that outsourcing could emerge as one of the big business trends of 2016 and an option that many CFOs can no longer afford to ignore.

While it has long-held a dirty reputation as a cost-cutting tool, Chris said this view was slowly beginning to change as companies started to see it as a smart way to achieve business growth.

“The last 10 years has seen somewhat of a revolution in the outsourcing economy, with technology shrinking the globe and making it easier than ever to access skills and expertise that were previously unattainable,” he said.

“It’s no longer just routine or administrative tasks on offer, with skilled professionals now accessible at the click of a button.

“Outsourcing is enabling companies to run a leaner operation, and pull in the skills and expertise necessary if and when it is needed. Regardless of whether you are outsourcing onshore or off, having a mobile workforce ensures your business is more nimble and able to make quicker decisions.

“At the same time, you have access to new talent, a broader skill base, new technology and the added benefit of allowing your business to focus on its core business.”

Offshore vs onshore

One of the reasons outsourcing has developed such a bad reputation over the years is due to its association with the loss of Australian jobs. There have been countless examples of high profile Australian brands such as Bonds and The Iconic being criticised publicly for moving jobs offshore and adding further carnage to an already weak Australian economy.

While offshore outsourcing is a viable option, onshore outsourcing can be just as effective for businesses in achieving efficiencies without costing Australian jobs.

For many companies, outsourcing onshore provides more assurance and control than taking the function offshore.

There is no language barrier or time zone challenges and the service providers understand the local market, regulations and legislation.

Additionally, reputational and security risks are minimised as customers take comfort knowing their work is taken care of domestically.

The trust factor

In the case of either onshore or offshore outsourcing, one of the most common barriers for companies is finding the right talent to partner with and then learning to trust their expertise.

The best way to manage this issue is to lean on someone that you trust, such as a business advisor, who may already have existing networks and can refer quality partners to you. At the very least, they should be able to give you advice on what to look, or lookout, for.

When taking on an outsourced partner, careful due diligence is required to ensure the security of your businesses information, as well as to protect against reputational damage.”

The other big risk for an organisation is not cultivating knowledge within your business, and that’s why it’s key that only non-core competencies are outsourced, to ensure you retain the skills and knowledge in the areas of the business that are vital to your prosperity.

Getting started

While it may be a case of ‘where do I start?’, It is a matter of understanding your business and the skills and expertise that need to be delivered in-house, and those where a mobile workforce may be more beneficial.

Initially, consider outsourcing non-core competencies such as the financial management of a specific and defined project, or a specialist marketing or information technology (IT) activity

This way you will be able to test the suitability of outsourcing for your operation, and start to understand its potential and limitations.

It also enables your internal talent to focus on what they’re good at, and not have distractions from activities that are non-core or that could be delivered by someone else

While outsourcing is nothing new, the variety of functions that are outsourced, particularly onshore, has peaked in recent years. Information technology, public relations, human resources, virtual assistance, engineering, distribution and logistics, and finance and accounting are just a handful of services on offer.

Are you ready to outsource?

The question of whether your business is ready for outsourcing is a fallacy. Every business, no matter how big or small, can utilise outsourced expertise to grow. The real skill is to identify what parts of your business to outsource.

Understanding what is a core and non-core competency is not as simple as it may sound.

Generally speaking, it may be better to think about potential outsourced tasks in terms of competitive advantage and the skills that exist within the organisation.

If a task or business activity has the potential to bring significant competitive advantage, and some internal expertise exists, then it’s unlikely to be suitable for outsourcing.

On the other hand, if the potential for competitive advantage isn’t as strong, and there is weak internal expertise, then it may be better to outsource these particular tasks.

Top 5 tips for outsourcing

1. Analyse your own business first – Look carefully at your core capabilities. Businesses should be careful to only outsource those functions that are not core to the business. For example, if your business is famous for its personalised customer service, outsourcing to a call centre may be detrimental to the business.

2. Ask the right questions – Don’t be afraid to put your service providers to the test. Ask for evidence of past experience, testimonials or a portfolio and make sure that the quality of their work matches your expectations.

3. Set clear objectives and deadlines – Be specific about the deliverables you expect and be realistic about the project’s schedule.

4. Read the small print – Ensure the scope of the project is laid out in a contract and agreed to in writing. Where a specific piece of work is involved, it’s important to be aware of who will own the intellectual property at the end of the relationship.

5. Monitor performance – It’s important to set milestones or checkpoints from the outset and stick to them. Ensure that the service provider is aware of the criteria by which they will be evaluated.

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