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08/01/2018

Outsourcing times - The present of the service market

 

Outsourcing has become one of the protagonists of the services market in recent years. In 2015, in Spain, there was talk of 52% of companies outsourcing some area of their business. Today, those percentages have exceeded 74%. For this reason, talking about outsourcing as the future does not have much practical sense; so we will discuss the present character of this business area.

To put us in context, in 2017 business services reached 150,000 million dollars, during the first 6 months of the year. According to International Data Corporation (IDC), 6% more than in previous years. Of this digit, the largest amount of investment in companies was in outsourcing, mainly in services oriented to projects, business processes, consulting and IT.

 

The major reasons

 

The question that arises is: why do companies outsource? One of the main reasons is the transformation of fixed costs into variables. This allows determining the acceptance of the services and, if they are not required, modifying them without margin to losses for investment in infrastructure.

However, there are other reasons to consider; as the flexibility that outsourcing provides for companies to adapt to the requirements of a constantly changing market.

In addition, being specialized companies suppliers, the percentage of customer satisfaction increases by up to 65%, according to Whitelane Research studies. Keep in mind that, in countries like Spain, the level of customer satisfaction is high, compared to other European countries, reaching figures of up to 92%, so take into account this factor is really important.

The reduction of costs, although it is still one of the determining reasons for resorting to outsourcing, year after year falls as the main reason. In the last 4 years it has decreased by 10 percentage units, while reasons such as business transformation increased by 28 units.

Finally, in times of crisis, difficulties in Access to resources have become another of the main reasons for Spanish companies to start an outsourcing process.

 

Objectives pursued by companies 

 

At this point, what would be the objective pursued by companies when outsourcing? Indeed, many try to improve their results, not only in terms of profitability, which is logical, but efficiency. Outsourcing allows a reduction of direct expenses through the contracting of specialized services, which generate added value through the professionalization of the service. This positively impacts the sales processes.

In addition, using internal resources for other activities, accessing new talent and offering different solutions to those that would normally occur, are viable alternatives when generating competitiveness.

Likewise, it is an initiative that allows betting on the optimization of certain processes and allows the execution of services already tested, for further evaluation.

All this is reflected, ultimately, in the increase in sales. But also, internally, improvements are seen in terms of organizational climate. In the companies that have implemented outsourcing processes there has been a considerable decrease in problems among the staff.

Seeing all these advantages, it is strange that 26% of companies in Spain have not yet come to this service as an alternative. In these cases the non-implementation is due to particular processes that do not wish to delegate to other companies, fear of a bad performance of the service or, simply, do not want it to be carried out in a different way to the conventional one.

 

And in times of crisis ...

 

For many companies in Spain, the crisis has been a period of direct impact on their companies, however, this was not the case of companies dedicated to outsourcing. In this period, many companies resorted to outsourcing as a way to sustain their services in the market, reducing contracting costs.

Some even think that the crisis worked as a democratizer, through outsourcing. The main argument is the level of investment that large companies made: before the crisis, investment in specialized resources did not allow small and medium enterprises to compete. Today, through outsourcing, services can be provided that are at the height of a market that is largely competitive.

According to the analysis department of “The Economist”, in processes of change as wide as the crisis, companies need to be able to respond to the conditions that arise and free up resources, in order to be productive, in the face of their recovery. In this case, outsourcing generates the necessary agility and flexibility.

 

The bet of the outsourcing companies

 

It is evident that outsourcing services, in areas such as human resources, logistics and administration, have already been assumed by the public, especially Spanish. However, there are other areas that are just beginning to be explored or that are booming.

As far as data are concerned, according to the company Whitelane, the billing level  of companies in the sector of information technology (IT), in Spain, is one of the most has grown, so this sector becomes one of the focus of work for outsourcing companies.

Also enter here the companies focused on the commercial area and “pymes”, which little by little make immersion in the sector of outsourcing. “Pymes”, at the production level, have a significant volume in the Spanish market. In the commercial sector, the bet is going directly to the point of sale, more than in other areas. The companies that currently bet on influencing this commercial moment, are having a great success.

 

For potential clients

 

It must be understood that outsourcing is not to replace what a brand does wrong, because this situation will cause the company to lose control over the action taken by the supplier. It is also not advisable to outsource what the company does for itself, which constitutes its backbone. That is to say, the nuclear processes and that mark a differential factor in front of others in the market.

The objective is not to provide a punctual service, but to make that service become a meeting point between the company and its customers. Therefore, the brand experience is one of the factors that makes its way into the outsourcing sector and with this, the implementation of new technologies that allow the monitoring of the service by the company.

Whatever the case may be, there are some guidelines that can be taken into account when outsourcing: having a clear idea of what is being sought and knowing what kind of suppliers are suitable for the organization, not only with respect to the service, but also as a reference to the culture of the company in relation to yours.

It is important to be clear about how much money you want to invest in this decision is another important element and in the case of long-term processes, to have moments to rethink the conditions of the agreements. A good suggestion is to give the provider a margin of freedom, so that he can offer services with real differential factors.

Now, it's not just about outsourcing, it's about the right time to do it. For some companies the moment will be when the product has a time of exposure in the market and, for others, outsourcing will be done from the beginning, as a new opportunity.

After doing all this tour of the market is more than clear that there are already some precedents in regards to outsourcing. It is a service with a projection of the future, but from now on it is already an alternative for companies and an intelligent bet when competing in the market.

It is not free that in Spain, the companies that have ever implemented an outsourcing process, 82% have kept the service contracted.