The question of ‘to outsource or not to outsource?’ can be a complex one for businesses, says Dave Reynolds, CEO, Business Process Outsourcing at Paragon. He added: “There are a host of factors to consider, from the practicalities of how the deal will work, the services in scope and the risk culture of your business, to how to manage internal stakeholders through this transition.
“The decision often isn’t black and white, so businesses will need to weigh up both sides of the equation. The risks to Business Continuity seen throughout the pandemic were more pronounced in internal operations. Those that were already outsourced with Disaster Recovery embedded into the solution were the least disrupted. With this risk now in focus, concerns about handling such a significant change are often outweighed by the risk-benefit of outsourcing. Even so, a move to outsourcing can initially feel like a loss of control and stability, as keeping processes internal provides a level of overview and visibility that may seem to be lost by outsourcing.”
Reynolds said that it’s common for businesses to worry about data security, particularly for highly regulated sectors such as financial services or healthcare, which might deal with the production or handling of documents like bank statements or medical documents. “Though handing over access to this information might seem like a significant challenge, it doesn’t have to be. Picking a provider with the right credentials and experience in data and risk management is vital. They can enhance your control over data and bring best practice to the relationship,” he said.
If you’re a large organisation that processes thousands of communications every day, it’s simply more efficient and cost-effective for them to all to be sent to an expert provider at secure locations, Reynolds said, where they can be digitised, processed and fed back into your system more quickly and securely than an on-site operation. You can also cope with peaks and troughs, if your business has any seasonality, without any loss of service.
Reynolds added: “As long as a business investigates their chosen partner’s track record for managing sensitive data and look for the right certifications and security culture, they create partnerships that effectively extend their own team, meeting and exceeding the compliance standard they demand.
“Despite the potential risks, outsourcing provides scope for a wealth of benefits, including the reduction of costs. By outsourcing, most businesses can expect to save about 25-30% of their operating costs as they will no longer be responsible for purchasing business-critical equipment and its upkeep, or for the training and development associated with handling certain processes in house. On top of this, many companies don’t realise that outsourcing business processes can elevate their service offering. Rather than making a like-for-like switch, outsourcing is an opportunity to reassess their offering and improve it with the help of an expert partner.
Aurelio Maruggi, CEO, Apogee:
Widespread remote and hybrid working practices have piled pressure on IT teams. Today, they are responsible for ensuring that geographically separated employees have the tools in place to complete their daily tasks. At the same time, security of devices both in and outside the office environment has become paramount to protect against emerging threats such as ransomware.
However, as IT professionals are expected to do more to support their organisation, the technology skills shortage is adding to daily workloads as demand outstrips supply. A shortfall of top IT talent is allowing the most skilled to jump ship to any number of job offers on the table. With retention a clear issue, over two-thirds of UK IT decision-makers (67%) view shortages of tech talent as one of the main threats to their business. It’s time to look externally to address the challenge, support stretched workers and make the most of strained budgets.
Smarter ways of working
Smart outsourcing is the key to smarter ways of working. A managed IT service can take care of time-consuming tasks such as the set up and imaging of new laptops for in-office and remote workers, without the need for skilled in-house teams to take on the job. Staff can access the latest technology, resulting in user downtime being significantly reduced as outdated equipment becomes a thing of the past. A managed service is also highly resilient and more cost-effective as large CAPEX outlays are no longer required. Experts can provide support for substantial roll-outs, both on-site as well as remotely, enabling flexibility.
IT staff are all too aware of the need to secure data stored in work systems. However, skills shortages and overstretched resources can pose a risk to security coverage of IoT devices, including printers. In addition, when it comes to managing these environments, there isn’t a one-size-fits-all solution. Teams of experts can complete pro-active monitoring and pre-emptive servicing to ensure uptime and apply the latest patches, updates and encryption technologies to protect against cyberthreats. Under-pressure staff are able to focus on other business priorities as a result.
Supporting under-fire teams
The IT skills gap not only opens up inefficient ways of working and potential security vulnerabilities, but is placing strain on individuals in the business. Employers can start to free up their workloads and allow them to prioritise other objectives. With smart outsourced services and access to external expertise, organisations can repurpose their existing in-house capabilities, help to fuel business growth and ensure that strained budgets are spent wisely in times of economic tension.
Patrick Elliott, CEO, HGS UK:
The majority of businesses outsource services to some extent, some just through supplier relationships, others by embracing true delivery partnerships. There are many advantages to outsourcing of services including cost savings, round the clock operations, together with access to non-core skills and talent, but whatever the scope, the key success criteria is an effective partnership. A bad pairing risks disrupting the delivery of quality and efficient services to end-users and could be a drain on resources if not implemented in the right way, or by the right people, but get it right and the sum is greater than the parts.
Cultural alignment is key
Finding the right partner in an outsourcer can be a challenge, but when it works, it really works. Carrying out research, having conversations with outsourcers can be a great way to not only get to know a potential outsourcer, but can ensure they also get to know you, your business needs and culture. Finding the right cultural fit is crucial to ensuring long-term success between the business and the partner. In the long-term, the working relationship and alignment of vision brings greater benefits than cost saving alone.
Industry expertise and experience
The right outsourcer is a true partner and operates as an integral part of the business, bringing insight and skills at a breadth and scale not available to the organisation alone. They offer a consultative approach that supports the client business to deliver the best outcome and experience. It does this by being expert in its delivery of effective business services complementing the sector expertise of the client.
A modern outsourcing partner brings with it a network of partnerships with other technology businesses that they can leverage to support the business’s needs. Working with the right outsourcer will also mean gaining access to a partner that is backed by a track record of quality delivery in your and other sectors. The network of proven partners is therefore expanded exponentially.
The cost consideration
Many businesses are feeling the effects of economic downturn and rising inflation in the UK. Not only this, but in the realm of customer experience (CX), it is increasingly a challenge to run a sophisticated and responsive operation designed for the expectations of modern consumers. The increasingly competitive marketplace means loyalty is increasingly dictated by service quality and reviews of this service.
Outsourcing customer service functions can be a way to cut down on costs and enhance the customer experience and free up the organisations skill to concentrate on core activities. For smaller businesses, outsourcing can often be an effective option for delivering modern front-line functions to end-users, without the investment in infrastructure, putting them on the same foot as larger organisations.
Mandla Mbonambi, CEO, Africonology Solutions:
I think, first and foremost, we should understand what outsourcing is. According to Investopedia: “Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company’s employees and staff. Outsourcing is a practice usually undertaken by companies as a cost cutting measure.” In this way, the companies get to focus on their core business operations and activities, while the outsourced company/organisation focuses on the projects assigned to them by the hiring organisation.
As with many strategic approaches, outsourcing is not immune to any pros and cons as it will be impossible.
Benefits of outsourcing
Outsourcing has several benefits within the context of business engagement or strategy.
Some of the benefits are as follows:
- Lowering the labour cost, the hiring organisation doesn’t have to deal with the like of hiring consultants permanently, thereby allocating the full-time employee packages for a short-term project
- Low labour risks, the company that is outsourcing the work doesn’t have to deal with the risks that come with the employment of the members of the project team
- Allows the hiring organisation to focus more on the core of its business, while the non-core are assigned to the outsourcing organisations/companies to deliver within the agreed time and budget
- Provide access to the experienced and talented pool, by outsourcing the work to the specialised and experienced outsourcing organisation the hiring/outsourcing company gain the benefit of the technical know-how and skilled resources
Disadvantages of outsourcing
Some of the disadvantages are:
- Risk of IP, although there are non-disclosure and contracts that the organisations signed and agreed on, it doesn’t take away the potential risk of having one of the employees of the outsourced organisation sharing that, which can happen with outsourcing company employees
- Sensitive data can be tricky to manage – how should the sensitive data be handled by the third party, especially if the outsourced organisation is offshore – not within the same borders as that of the outsourcing organisation? This will add to the security costs that need to be allocated to protect sensitive data and information
- Communication, often the communication between outsourcing and outsourced organisation can become an impediment to the relationship between two organisations. More so, if the organisations are from different regions and language
- Lack of flexibility, the contractual agreements often present rigidity in the execution of the outsourcing engagement. Any changes that need to be made to the solution or product will have to follow a stringent legal process that both have embarked on in the original agreement
Nicol Myburgh, Head: CRS Technologies HCM Business Unit:
Outsourcing functions has become a popular strategy for businesses looking to access specialised skills and scale a business quickly in a new region. It has advantages and disadvantages (threats) but is definitely worth while considering should there be a business need. Below I will list and explain both the advantages and disadvantages:
- Cost savings: Outsourcing is often time the more cost effective approach, when an in house resource is appointed there is a large overhead cost and inherent risk involved
- Access to expertise: Outsourcing provides access to specialised expertise and talent that may not be available in-house, allowing businesses to gain a competitive advantage
- Focus on core competencies: Outsourcing non-core functions enables businesses to focus on their core competencies, leading to improved operational efficiency
- Scalability and flexibility: Outsourcing allows businesses to quickly scale up or down in response to market changes without the need for additional investments
- Loss of control: Outsourcing may result in a loss of control over certain business functions, impacting quality standards, data security, and policy enforcement
- Communication and cultural challenges: Outsourcing to providers can introduce challenges such as language barriers, time zone differences, and differences in work practices and cultures
- Dependency on external providers: Outsourcing may create a high dependency on external providers, posing risks such as reliance on a single provider or vulnerability to changes in the provider’s business
- Potential risks to reputation: Outsourcing customer service or data-related functions may carry reputational risks if not managed effectively, such as data breaches or quality issues impacting the business’s reputation
In conclusion, outsourcing offers benefits such as cost savings, access to expertise, focus on core competencies, and scalability, but it also has disadvantages such as loss of control, communication challenges, dependency on providers, and reputational risks. Careful consideration and effective management are crucial for successful outsourcing implementation in businesses.
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