A new study from HfS Research and KPMG International reports that businesses in 2013 are continuing to rely heavily on outsourcing, not only to save money, but also to strengthen their business by leveraging the expertise and up-to-date processes of service providers.
Phil Fersht of Horses for Sources noted that this is despite increased negative media attention that has been directed recently at the practice of outsourcing. The survey, which focused mainly on trends in business process outsourcing, as opposed to manufacturing outsourcing, polled nearly 400 buyer-side businesses.
As you can see in the chart below, most of these businesses are planning to increase their outsourcing in several areas. Businesses intending to decrease their use of outsourcing fall in the single digits percentage wise in any given category. In contrast, nearly four out of ten study participants plan to increase their outsourcing of application development and management, and close to one third are looking to increase outsourcing of their financing and accounting processes.
The study also analyzed the factors driving the decision to outsource and found, not surprisingly, cost savings, flexibility and standardization to be key reasons.
Clearly, outsourcing is not only here to stay, but will also be a vital strategy for many companies.
by Arlette Measures
If you’ve decided to start outsourcing in order to save money and increase efficiency in your business, the next decision is where to begin.
Choosing the right processes to outsource is a very important part of a successful outsourcing strategy.
Start by doing a thorough analysis to assess your company’s core strengths. These are the activities that add value for your customers and/or set your company apart from the competition.
Harvard Professor Michael Porter introduced the model of the value chain in his 1985 book Competitive Advantage, in which he identified a typical company’s primary and support activities, as you can see in the diagram.
You can easily identify your company’s key strengths by thinking about which processes are directly related to creating and delivering your main products or services. Consider also, processes in which your company excels. These are the areas you will want to keep in house.
You might want to conduct a brainstorming session to help create a list of core competencies vs. activities that could be better performed by an outside company.
You can break this down further by analyzing tasks within your core areas to identify those activities that do not add value or do not create a cost advantage.
Other factors to consider are whether handling a certain process in house would require a significant investment in equipment; also whether the activity carries risks that would be better handled by an outsourced provider.
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