With a rapidly changing business environment, driven by new technologies, business leaders can no longer afford to view outsourcing as a quick fix to help cut costs. To remain competitive and relevant on the world stage, outsourcing should form part of a company’s longer-term business strategy to access talent and expertise.
The evolvement of the so-called Internet of Things has created industries such as Big Data, Wearable Technologies, Smart Appliances – sectors that are projected to grow exponentially in the next ten years. Technology is advancing at such a rapid pace that the World Economic Forum’s Professor Klaus Schwarb has coined the term “The fourth industrial revolution” – an age defined by cyber physical systems and artificial intelligence.
Outsourcing first evolved as part of companies’ business strategy in the 1980s to help cut operating expenses. However, the industry has undergone a paradigm shift as technology re-wrote the rules regarding speed, cost, global collaboration and access to talent. Meanwhile, uncertainty and volatility in the world markets means that businesses not only have to keep costs down but also be nimble and flexible enough to make quick adjustments and keep operations going even as trading conditions become tough.
To provide a perspective on cost savings from outsourcing, the hourly compensation in the manufacturing sector in Singapore is estimated to have been about $23.95 in 2013; in Australia, it was $47.03 and in the Philippines, it cost just $2.12 to fulfill the same role. Multiply that by hundreds of staff, the annual savings could run into millions.
With the rapid development of technology, the freelance economy is growing in leaps and bounds. Businesses are increasingly outsourcing work, which requires specialist knowledge such as accounting, web design, digital marketing, content development and translation. According to recent report by real estate consultancy JLL, growth in flexible working, outsourcing and co-working spaces, is expected to accelerate in the next five years. Office demand in Southeast Asia is projected to grow at 6 percent per annum until 2020 due to economic growth, further acceleration of outsourcing from developed markets and the rise of the middle class.
Clearly, businesses, empowered by technology, are progressively embracing offshoring and outsourcing as part of the company’s business strategy. Contracting third parties enables a company to access world-class talent and expertise, allowing them to bring new products and services to market faster. Outsourcing also allows the company to access the state of the art technology and systems in all of its commercial activities and outsourcing is no longer merely a business tactic to cut costs.
As the world increasingly advocates the sharing of resources as part of the drive to maintain a sustainable economy, outsourcing can become part of a company’s Corporate Social Responsibility strategy.
In the coming years, technology is expected to cause more disruption. Businesses, which do not want to be left behind, should start to take a strategic view about outsourcing. Outsourcing the right business functions will enable the company to not only save on costs but also reap the benefit of talent and cutting-edge technology to gain competitive advantage.