Outsourcing is often viewed mainly as a strategy for producing cost savings. However, by simply following a traditional cost-focused approach, countless companies may be missing opportunities to add value and gain further competitive advantage. Outsourcing should not focus solely on cost considerations, but should be concerned with building a competitive edge.
The ability to outsource IT functions has created limitless possibilities for competitive advantage
The current year may very well be a watershed year for outsourcing. Increasingly over the past few years, outsourcing has been recognised as a key tool in obtaining better knowledge management and enhancement as well as better cost planning. Notwithstanding the recent turbulence in the world economy, perhaps partly due to this turbulence, the phenomenon of outsourcing has continued to grow on a global scale. It has driven on cutbacks to both the public and private sectors without compromising the integrity of services. Such is the growth of outsourcing that in 2011, the London Magic Circle law firm Norton Rose reported estimates of $100 billion worth of new outsourcing contracts are signed every year.
Outsourcing offers a number of advantages, including organisation and increased interactivity of employees with the greater world and the development of credibility with stakeholders and regulators. A difference between today’s outsourcing market and that of a decade ago is that outsourcing is no longer an innovative risky undertaking as it may once have been perceived. In this day and age, outsourcing is a mainstream strategy that has been successfully adopted across the corporate universe by companies.
Companies have started to understand that they have to focus their limited resources on their core business and not the supporting technologies. The decision to outsource should not be purely an economic consideration. The ability to react to changes in the business with timely delivery of quality services plays a major role in a company’s decision to outsource discrete business processes or services.
It has been argued that the term ‘outsourcing’ is an unfortunate misnomer denoting simply the offloading of any number of business processes onto outside parties. A number of companies do exactly this. Therefore it is not surprising that these companies later report disappointment with their arrangements. Outsourcing blindly and without due diligence is a poor idea.
When carried out judiciously, outsourcing is not so much outsourcing but rather the ability and will to access knowledge and expertise by acquisition and partnering, as opposed to exclusively organic knowledge creation and development. From the viewpoint of the outsourced provider, outsourcing is all about taking the notion to adapt to customer requirements in terms of solutions and working with them to support them.
The best practices of outsourcing have been outlined in surveys of successful outsourcing clients and they reveal that key success factors in outsourcing include judicious planning, careful vendor selection and a commitment to collaborative relationship management. The ability to outsource IT functions, from end-user support functions to the IT infrastructure itself, has created limitless possibilities for competitive advantage and levelled the playing field for start-ups and established global corporations.
The opportunities of outsourcing provide cost savings, enhanced expertise and flexible, tailored sourcing. By ignoring the advantages and opportunities afforded by outsourcing, decision-makers face the risks of falling behind financially and stumbling into a competitive situation in which their competitors, having successfully sourced externally, have additional capital to invest in new markets and advanced technologies. However, rushing into the outsourcing decision without clear goals can result in hugely misaligned expectations.
The decision-makers’ search should be for an outsourced knowledge partner that can become part of a management team. The outsourced partner must take on ownership of the business process or service, in turn assuming responsibility and accountability for it through a detailed understanding of the concerns and requirements of the company entrusting them with key business processes.
A transition, perhaps even on a philosophical level, must be made in order to change the arrangement with and perception of a mere service provider to fiduciary to seamlessly deliver competencies and expertise.
This article reflects a recent panel discussion hosted by BMIT, the cloud services provider. The panel featuring Kyte Consultants’ Alan Alden, FFF Legal’s Tonio Fenech, Go plc’s Markus Golder, Playmobil’s Ivan Refalo, and BMIT’s Christian Sammut raised several valuable points. The White Paper may be downloaded from http://www.bmit.com.mt/outsourcing .