‘Outsourcing’ comes of age

The concept is old. The label dates from the ’80s. But the scope and relationships of “outsourcing” are changing as the trend is growing.
Another term is “contracting out.” That has negative overtones for some people but the practice supports the growth of new businesses and greater specialization.
Activities that are important, but not part of an enterprise’s special skill sets, have long been bought elsewhere–outsourced. That included legal services, advertising, catering, printing, renovations, and installations.
But most companies used to do in house all the work that was considered part of the ongoing operation.
That has changed.
Many organizations are now focusing on their “core competencies.” They try to excel with their product or service in order to have a corner on a market and compete successfully.
They also eliminate in-house work they consider peripheral to their core business. Any area in which a company doesn’t want or need to build expertise is a candidate for outsourcing:
Some criteria for activities to be outsourced:
•it is not done often enough to dedicate employees to it;
•it requires costly tools that are rarely used;
•it takes expert skills that you don’t have or can’t maintain;
•it requires unusual research, creativity, or connections;
•it takes too long because you cannot free up resources needed elsewhere; and
•for whatever reasons, you cannot get it done with quality in-house.
The trends:
•outsourcing is becoming more common;
•most experience with it has been positive (companies get its benefits);
•so far, most of the outsourcing has been in low-risk, narrow activities. That’s changing to broader, more important processes; and
•for some companies, outsourcing is now strategic, not just a cost reduction tool.
A recent study of outsourcing trends among 300 large global companies, including 25 Canadian enterprises, found:
•73 percent of these organizations practise outsourcing. Their main reasons are:
–to focus better on core competencies;
–to enhance profitability and shareholder value; and
–to avoid investing in more technology.
•Currently, the most often outsourced activities are:
–benefits administration;
–payroll processing;
–advertising and public relations materials;
–real estate management; and
–internal audit.
•52 percent say outsourcing is more important to them now than it was three years ago; 95 percent were satisfied with its results; 63 percent achieved the cost savings they had expected.
The relationships between companies and their outsourced-service providers also are changing. They are sharing the risks and rewards of the practice, they use e-business to implement new and innovative methods, and they require greater investment by the service provider.
For all these reasons, they tend to become strategic partnering arrangements.
Some broader processes outsourced by innovative global companies are financial transaction processing; human resource administration; supply chain management; document and print management; and customer service.
If your enterprise is “lean and keen,” you are probably doing some or lots of outsourcing though you may not call it that. If you have a special talent or exceptional expertise in something, consider becoming an “outsourcer.”
Your chances are improving.

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