Strategy & Operations » Outsourcing key to cope with cost challenges and accelerate digital transformation

According to Deloitte’s global outsourcing survey cost reduction is the primary objective of adopting a managed services strategy (70 percent), ahead of increasing agility or improving the quality of service as in previous years.

The survey also found that many companies believe that external service providers can help them spearhead improved supplier management and alleviate some of the supply chain constraints experienced amid the pandemic.

Many companies are also expected to accelerate overall outsourcing as they learn to collaborate in a world where speed, flexibility and cost are more important than physical location.

Since the pandemic started CFOs themselves have witnessed more pressure to shore up value and drive down costs – not only within their own finance functions but across their wider organisations, according to industry experts.

“At the end of the day, it does all start with costs,” says Paul Prendergast, managing director and lead for Accenture’s CFO and Enterprise Value Europe Practice. “CFOs now recognise that by using outsourced services providers, they can achieve process improvements and better insight into their company and its business, which in turn ultimately leads to cost reductions.”

He points out that many CFOs now realise that outsourcing can help them reduce costs across the finance function, particularly accounts payable and accounts receivable, as well as in human resources,  procurement and supply chain activity.

Stan Mlatac, CFO at global commerce company RedCloud Technologies, notes that certain departments are more suited to outsourcing than others.

“If a decision is taken to outsource, the usual suspects are tech, finance and customer service, as the nature of their work is similar from country to country,” he says. “This type of work could also be short-term depending on project needs.”

Dealing with staff shortages

The transition to homeworking has made outsourcing a more attractive proposition to companies when looking for skilled resources.

The pandemic has put paid to the widespread notion that the physical co-location of resources, which has often inhibited outsourced transactions in the past, is still necessary, according to Deloitte’s survey report.

Whilst external service providers have always been considered “outsiders”, the crisis and ongoing movement to both homeworking and remote working, has changed the nature of workplace relationships, making outsourcing a more viable option, it claims.

“Whereas in the past, companies were used to having staff working in the same building, it is now the case that they are relying more on dispersed teams and recognise that people can work somewhere else,” says Prendergast.

“Many organisations are turning to third-party outsourced services providers because they can offer scale and simplify the recruitment process,” he says. “At the same time, this provides them with the opportunity to engage skilled people, who for personal reasons may be looking for part-time work.

“Outsourcing offers companies the ability to have extra resources at hand to handle peaks and troughs in their business.”

The flexibility offered by outsourcing is vital when scaling a business, says Mlatac, where people are key to success.

“Outsourcing is a way to avoid spending time on recruitment and to gain access to a larger talent pool,” he says.

However, outsourcing must be “planned and executed correctly to avoid pitfalls such as lack of control, communication and quality issues”.

Accelerating digitisation

For many companies, outsourcing also presents a way to harness specialist skills and more advanced technologies.

Mlatac notes that in today’s competitive IT environment, finding people with the right skillsets is challenging.

“In technology more than anywhere, keeping control of development is crucial, but getting the right talent is the main challenge,” he says.

“Outsourcing part of the tech team could be considered, especially now there are European tech centres in countries such as Portugal, Bulgaria and Ukraine.”

Companies are utilising outsourcing to assist with adopting cloud technologies (68 percent) and Robotic Process Automation (RPA) (64 percent), as well as single instance Enterprise Resource Planning (55 percent), according to Deloitte’s survey report.

“A CFO would never look at outsourcing all activities but would outsource part of them to reduce the overall costs of the finance function,” says Prendergast. “For CFOs, it can bring huge opportunities to improve automation, analytics and reporting.”

“IT outsourcing also enables companies to reduce their existing IT infrastructure and leverage new opportunities in the cloud,” he says. “It offers the ability to innovate; leverage on a larger partner; and evolve more quickly.”

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