The changing face of outsourcing
Outsourcing We invited senior figures in the industry for a round table discussion on what outsourcing companies can bring to a business.
Taking part were Kerry Hallard, CEO, National Outsourcing Association; Vince Smallhorne, Group Sales and Marketing Director of outsourcing company Parseq; and Jamie Lyon, Head of Corporate Sector, ACCA (the Association of Chartered Certified Accountants).
Why do businesses use outsourcing companies?
KH: To bring in specialists who know how to transform processes and improve services. The outsourcing companies usually know how to do it much more cost effectively than the business. That frees the business up to focus on its own core competencies.
VS: Cost, quality and leveraging external expertise. For example, we have a number of people who do nothing else except process invoices for a range of different clients. That gives us real insight into invoicing efficiencies, which enables us to go back to our clients and offer them improvements from the start to the end of the process.
JL: Outsourcing companies can bring processes and operational excellence, wide client-base experience and sector expertise and allow the client to focus on what is core to their organisation. They enable the client to drive internal change.
The industry has suffered from a poor reputation, though, hasn't it?
KH: And that drives me absolutely potty because that is down to a couple of high-profile projects that have gone wrong. Think of the London 2012 Olympics which was all outsourced — but the one thing everyone remembers is the G4S security issue. There is so much outsourcing in the UK that goes on incredibly successfully.
VS: There is no reason why any business could not take the majority of what it does and outsource it to a third party. Giving a business process to an expert who can deliver it with real efficiency, greater scale and greater quality is a no-brainer. But, yes, you're right there can be softer issues around: 'What if it fails, what if it can't deliver?'
JL: The myths are that outsourcing companies can only deliver lower value finance function services, which is not necessarily true — they are ambitious to move up the "value chain" for the finance function; that they don't bring any innovation — when, actually, they do but, arguably, are now expected to bring even more; and that they are only interested in client fees and not in driving a true partnership. That's not true: they recognise why partnerships matter.
How quality be assured from an outsourcing company?
VS: I think that's relatively easy. Leveraging of contracts, service-level agreements and key performance indicators are consistent measures one can use to measure the quality of output.
KH: Good governance is also important — from both the supplier and the client side — to make everyone is pulling in the right direction, everyone is happy and teams are working well together.
JL: It's important to establish a robust rendering process and use intermediate advisory firms to bring client and outsourcing firm together.
Can outsourcing reduce company overheads and add value?
KH: Saving money has always been, and continues to be, the number one driver for outsourcing. Outsourcing is very beneficial to a business in terms of its operational and capital expenditure because it means they don't need to tie up so much money in, for example, infrastructure, freeing them up to invest in other areas.
VS: Outsourcing companies can drive technology to make a business process more efficient. We can make investments in, for example, scanning equipment because of the volume of work we are dealing with in that area. Typically an end customer would not be able to compete with us on a level playing field for that same service.
JL: Yes, by standardisation of activities, centralisation into locations and cheaper operating locations and economies of scale. They add value by driving process and operating excellence.