Outsourcing was fervently stamped with negativity last year. But the largest-ever research survey by HfS Research (with the support of KPMG International) indicates that majority of businesses are undaunted. In fact, only a twentieth of its respondents are planning to reduce it in 2013.
Outsourcing is here to stay, whether you like it or not.
The Outsourcing Doom
There have been widespread talks about the end of outsourcing. The presidential election painted it as an evil business practice that robbed the average working class Joe of making a decent living. From there it snowballed, accumulating criticisms until it turned into one giant ball of negativity.
Talks of an insourcing boom emerged as GM created a couple of assembly lines. Its CEO, whose sentiments are in line with other critics, said offshoring is “quickly becoming mostly outdated as a business model for GE Appliances.”
State of Outsourcing 2013 Study
About 1355 stakeholders across businesses, service providers, and consultant organisations participated in the survey. The study primarily covered IT and business process outsourcing (BPO). The participants shared their views and intentions in outsourcing for 2013.
Out of 399 businesses, barely 20% are reducing their outsourcing plans. Majority of buyers are increasing their outsourcing activity for different functions - half on application services, four out of ten on finance and accounting, and a third on HR. Analytics and legal are emerging as new areas for outsourcing.
Beyond Labour Arbitrage, Now with Evidence
The study found that majority of businesses prioritise industry standard offerings when deciding to outsource. Yes, the survey found that 87% are still motivated by savings on operational costs. However, 82% stated that they are driven by flexibility and scale, while 74% seek to standardise processes.
Being competitive with business operations is achieved by standardizing onto best-in-class processes. And to achieve that standardization is, really, quite straightforward - move these processes onto proven technology platforms and have them operated in a cost-efficient manner. For most organizations today, they’ve failed to do this effectively in-house (through many years of pain and wasted investments) and shifting them over to a third-party has forced the issue and got them from A to C. - HfS
Outsourcing has significantly matured. It has already been proven to work, and will continue to work when used effectively. Australia's SME sector has made that leap, reaping success with their business ties in Asia. Enterprises around the world should look to these small players who have turned into global businesses despite their size. The focus is not why, but how to adapt in a global sourcing environment.
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