Why is Outsourcing Still a Relevant Option for Many Companies?
September 29, 2016
Digitalization, the Sharing Economy and other global trends are shifting the focus to new businesses and development instead of maintaining the existing operations with existing customers. One good way to free resources for something new and to accelerate business transformation, is outsourcing. It allows companies to:
Reduce operational costs
There are many levers for cost-reductions including: the use of more inexpensive delivery locations, utilization of virtualized or shared platforms, a better handle on one’s own systems and processes when managed by the industrialized Service Provider, benefits through the Partner’s negotiation power in sourcing etc. The typical contractual requirement after a proper transition is to decrease annual operational costs.
Scale fast and be profitable
Fluctuations in daily or weekly operating businesses can be significant. Therefore, companies may lose business or require a substantial reserve while waiting for the next peak to develop. This is one key reason why many companies want to secure scale-ups and maximize revenues. However, they want to transfer the risk of scale-downs to the Outsourcing Services Provider.
Avoid competence trap
Companies often face difficulties in developing the in-house competencies to meet the new requirements in a rapidly changing environment. It is difficult to teach new skills to existing staff or to acquire them from the marketplace. This can be even more difficult to do if the majority of the organization is focused on maintaining the old. The turnaround time is simply too long.
Access new skills and foster innovation
In addition to the basic operations of the outsourced processes, top-tier Outsourcing Service Providers also offer access to new skills and new development ideas. These global firms have consultancy arms with dedicated innovation centers and devote extensive resources to research, market studies and experiments. That is valuable for many traditional domestic business players who seek innovations such as a Cloud strategy or robotic process automation (RPA) as future options.