Could outsourcing boost your efficiency?

Date: 28-06-2015

Tagged as: ArticleGameplan

 

With outsourcing on the up in the UK, Kerry Hallard, CEO of the National Outsourcing Association, looks at the key efficiency drivers.

About the author

Kerry Hallard is CEO of the National Outsourcing Association, the leading association serving both the outsourcing professional and the global outsourcing industry. Their vision is to grow the size and positive reputation of the outsourcing industry and promote world class outsourcing.

 

Kerry HallardOutsourcing infographic

There’s no doubt that outsourcing is on an upwards trend. Figures from The Financial Times show that its value in the UK doubled in the four years to July 2014 – to an impressive £88bn1 – based on several compelling drivers:

  • Cost reduction.
  • Service improvement.
  • Productivity improvement.
  • Access to new technologies.

A study published in July 2014 by The Information Services Group (ISG) showed that the value of public sector outsourcing contracts value of public sector outsourcing was almost double that of the commercial sector, at £51bn over the preceding two years, compared to £30bn.2 This level of growth has been fuelled by the cost-cutting imperatives of the austerity drive, and by the relative immaturity of outsourcing within the public sector.

In contrast, the private sector is a mature and experienced user of outsourcing, with less opportunity for a dramatic 'boom'. However, there is still growth driven by the value-add that businesses can achieve by working with a specialist – namely service and productivity improvement.

Access innovation

As an industry, we are also seeing an increase in the number of companies who turn to outsourcing to secure access to new technologies, innovation and new ways of streamlining their processes – without the huge capital investment. That's a real motivator in the quest for greater efficiency.

Consequently, one of the biggest growth areas within the outsourcing sector is in business processes, which includes services such as payroll, accounts, HR and business analytics. Employing a specialist outsourcer for these functions can leave a business free to concentrate on its core activities.

Overcoming perceived challenges

As the second largest employer in the UK, the outsourcing industry delivers a massive boost to the Treasury and the economy3. However, outsourcing isn't right for every business and, even when it is, there can be challenges in implementing an effective outsourcing strategy, particularly around perceived lack of control.

Media coverage of outsourcing 'failures' often neglect to recognise the positives that a business can achieve if outsourcing is properly managed. To make it work, a company needs the right culture and leadership to embrace the opportunities that it offers employees (through broader career choices), customers (through service improvements) and the bottom line.

As with any area of business operation, strong management is crucial.

Delivering professional standards

At the National Outsourcing Association, we work with ISO (the International Organization for Standardization) and BSI to promote best practice standards in outsourcing, which can reassure businesses considering outsourcing for the first time. We also provide accreditation for individuals and companies, and have recently launched a GCSE-level qualification in outsourcing. This, and continuing training and development, are helping to professionalise the industry.

The key issues businesses should consider when thinking about outsourcing are:

  • Talent. The number one issue in outsourcing is about getting the right people in the right job, and then managing them properly.
  • Culture. You need leadership that promotes the opportunities and gains for the whole business.
  • Governance. Manage your outsourcing providers with a balance of autonomy and control to optimise the relationship.

Driving efficiencies

With a focused approach, outsourcing can be an effective strategy for driving efficiency. Many of the UK's largest companies have been outsourcing for a long time – The National Trust, for example, outsourced IT infrastructure services4 while the NHS operate an outsourcing/joint venture model called NHS Shared Business Services in conjunction with service provider Steria.5

 

“Medium-sized businesses are realising that they can replicate the gains that larger players have made through outsourcing.”

These programmes have demonstrated significant cost savings as well as service and process improvements. That's where the real value in outsourcing lies – in delivering large-scale efficiencies.

The opportunities we see now for the industry are in the mid-market, where medium-sized businesses are realising that they can replicate the gains that larger players have made through outsourcing. The really big players in outsourcing are all focusing on this market as a huge growth area, as more and more businesses wake up to the efficiencies that outsourcing offers.

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