Posted on 16 May 2012.
By Martin Conboy of The Sauce
Most Australian companies don’t want to send business functions offshore, but many intend to outsource a lot more roles in the next two years and the primary aim isn’t to reduce costs, according to our recent survey.
The survey found 83 per cent of companies would prefer not to send work offshore.
However, increases in outsourcing were expected across a range of areas including finance and accounting, HR, marketing, reporting and analytics and print and document management.
In Australia, there are many businesses both large & small that have outsourced or are about to outsource a number of business processes. There is no doubt that the outsourcing market has burst out of the shadows in the last two years.
Outsourcing has become a valuable tool for businesses to deploy in a hyper competitive market. The drivers of change, from a lift & shift approach to a more considered business expansion opportunity means that organisations are beginning to see that by outsourcing their non-core business processes, they have a lot more time to spend on a core competencies; the work they know best.
Up to now outsourcing has received a bad rap. As a result, most Australian businesses, possibly out of fear of the unknown, have not properly explored the opportunities that it presents. Often mistaken for ‘offshoring’ it is only now that outsourcing and offshoring are having their day in the Sun.
As Ken Henry (Australian Secretary of the Department of the Treasury) noted as far back 2006: “Australia has much to gain from off-shoring – most obviously through a lowing of costs to business and ultimately consumers. Opposition to ‘offshoring’ is based on the same protectionist nostrums that were once used to support the high tariff wall that a generation of Australian policy makers has been busy dismantling. It may be dressed in a different garb, but it is no more respectable.”
Being apposed to importing services through offshoring is like being opposed to imports. It would mean if we followed it to its logical conclusion that Australians would be unable to have iPhones (Heaven forbid) travel overseas (Say its isn’t so) or drive well made Japanese or sexy European cars. (Wouldn’t happen!)
Australians don’t bat an eyelid by taking advantage of our high foreign exchange rate and grabbing a bargain on line, so how is that any different from buying a service online (via the internet).
Asia’s surging growth – including high demand for our commodities – has placed us close to the engines of global wealth creation. Prices for the commodities Australia sells to the world have never been higher, providing an unprecedented opportunity. So apart from reaping the benefits of outsourcing be it locally (In Country) or off shoring we should be spreading the love around to our Pacific neighbours.
Having said that there are some challenges as well, a recent report conducted for Deloitte Consulting by the Economist magazine indicated that across the Asia-Pacific region one of the major risks facing corporations was staff attrition and lack of human capital .in fact on average 25% of companies across the Asia Pacific region indicate this is a major area of risk.
Its no secret that we have a skills shortage in Australia and many BPO service providers have perpetual ‘Want’ adverts on all of the job boards. It follows that many companies are being pushed down the path of outsourcing and off shoring just to access available staff with the right skill sets.
Our own recent BPO Research report (The Australian BPO Report 2012) http://thesauce.net.au/sauce-research supported by IBM and Fuji Xerox Australia has revealed some interesting insights from the buy side of major Australian organisations. “ The report reflects the rapid pace of change and maturity that the Australian BPO industry has undergone over the last decade. It has evolved from pure cost cutting, to improved efficiency, to strategic transformation and an important part of business strategy,” said Russell Ives, Director, Global Process Services, IBM Growth Markets.
“The report highlights that Australia’s senior business community are aware of the benefits of outsourcing and decision makers are looking towards higher order benefits such as improving financial flexibility, driving free cash flow, strengthening customer satisfaction, increasing market penetration, expanding into emerging markets and taking advantage of the opportunities with a global economy,” said Ives.
Most outsourced business processes
The report highlights that while outsourcing decisions in the contact centre and customer service functions were by far the most widely reported, usually in a negative way, customer service functions are actually not among the top three of most outsourced activities. Human Resources, and Printing/Document Management were found to be the most outsourced functions (15 and 18 percent), followed by Finance and Accounting (13 percent). In the next 12 to 24 months, HR outsourcing is expected to grow to 23 percent.
Marketing and customer relationship management
Outsourcing of marketing processes including CRM (Customer Relationship Management) is predicted to grow by 21 percent within organisations that already outsource elements of this function. Of particular note is that online marketing is expected to nearly triple, growing from 6 percent to 17 percent, signaling major opportunities for organisations offering these kinds of services.
Cloud computing and outsourcing
Another trend emerging in the outsourcing sector is the increased use of cloud services. A large number of organisations are now considering cloud computing (35 percent) when making the decision to outsource; yet a marginal proportion (15 percent) of organisations have adopted cloud computing at an enterprise level as part of their outsourcing strategy.
The report highlights that increased mobility and Cloud will create a ‘free agent’ revolution in service outsourcing as the ability to work from almost anywhere in Australia becomes possible using remote mechanisms. This is particularly relevant for the mining industry, which operates over vast distances. In these scenarios, the value of Cloud services is even greater when it can be tailored to accommodate the unique elements of a particular industry.
So in conclusion we believe that Australia has moved past BPO 1.0 (Lift & Shift) and is sitting somewhere between BPO 2.0 & BPO 3.0 with its foot on the accelerator.
Get your copy of the Australian BPO research study now.
Go to – http://thesauce.net.au/sauce-research