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Outsourcing: An essential component of remote business success
Outsourcing, like leveraging, became one of the buzzwords of business in the 1990s. Unlike leveraging, the concept of outsourcing has since evolved into an essential component of successful business strategy.
Broadly speaking, the concept of outsourcing has gained favour as a result of the ongoing globalisation of markets, leading to increased competition. The reasons for its popularity are simple and measurable: not only does outsourcing enable businesses to focus on their core activities, but the provision of various support services by independent specialist companies – ranging from human resource management through facilities management to procurement, consolidation, forwarding and logistics – this has created opportunities to improve cost control while maximising access to scarce international resources. Moreover, the trend towards outsourcing has less to do with cost reduction than cost management: companies are looking to extract maximum value their money.
In addition, outsourcing of certain services has provided companies with the tools required to implement transformational agendas. It does so by alleviating the inordinate amount of time and effort that a successful transformation process demands, effectively turning management strategy and objectives into on-the-ground change. Indeed, outsourcing can prevent the stillbirth of a company-driven change programme by compelling the buy-in and commitment of employees to the programme. Outsourcing may also be the end-result of the change process, with the provision of non-core functions formerly housed within the company becoming buy-outs.
In general, there are five strategic and five tactical reasons for outsourcing, all of which display a common thread in terms of cost containment, implementing change and optimising access to resources and skills that may not be available through traditional avenues. These reasons are summarised following:
Although it is clear that outsourcing can add measurable value to today’s businesses, the practice is not necessarily fail-safe. To the contrary, the success of any outsourcing arrangement depends on several factors, not the least of which is a solid contractual agreement between the company and the outsource service provider. A contract that is based on a thorough understanding of the expectations of both parties with proper supervision and ongoing auditing to measure service levels.