Outsourcing – taking the investor’s perspective
Author – Amalia Sterescu
Growth in business process outsourcing ( BPO ) is currently defined by a constant acceleration while numerous regions around the world are in bloom from this point of view. As investors have become bolder, new areas were tested; support and shared service centers are opened in countries where this line of business has just begun to flourish. Companies have realized that in order to maintain their top competitive rank they must rely on the best outsourcers to proceed with their non-core functionalities, thus having the time and energy to focus on what defines them as top players on the market: their main specialties and capabilities. For many enterprises, small or large, the discussion is no longer about “what” or “why” they should outsource but “where” they should do it and what region best suits their needs.
Outsourcing updates at a global level
Investment in outsourcing nears $1 trillion/year worldwide as recent studies have shown. 65% of that amount comes from the investment done in Information technology outsourcing (ITO) –(term referring to a company’s outsourcing of computer or Internet related work, such as programming ) and the other 35% comes from Business Process Outsourcing (BPO) – ( the outsourcing of the work that does not require much of technical skills- HR, Accounting, legal outsourcing, etc ).
Over 90% of major companies use some form of shared service centers or outsourcing, most commonly in a captive or hybrid model. The industry has a massive growth between 2012 and 2013, and companies now tend to take the outsourcing perspective as a natural step towards their development – a pole revealed the fact that 67% of the companies expect to increase their SSCs operations in 2015 and in the years to come.
As presented in a recent article, cost is no longer the main business driver when the outsourcing decision is made. Investors are now more concentrated in integrated business services, in globalization, communication and culture, quality of service, dynamics and professionalism. Companies are also interested in talent management – the human capital required for an organization to meet its needs and to stay on top. For 79% of investors this is a critical process and they are not ready to overlook it.
Another important and unique change comes from the increased number of Shared Service Centers reporting directly to the CEO. In the past years, that number has doubled. A senior executive will always be pressured by time and will always have to select the activities and the reports that will be handled directly by him/her. The fact that they took the responsibility to manage, control and supervise directly the outsourced departments says more than enough about the value this industry has at the moment.
How outsourcing decisions are made by big players
If the decision to outsource was finally took, a road of opportunities lies ahead. However, we must not assume that the road is smooth and lacks obstacles along the way! It’s an attractive business strategy but it is not the easiest process! Outsourcing requires strategy, planning and hard work. Outsourcing decisions require methodology. The investors, with the help of outsourcing advisors identify the strategy, scrutinize the commercial efficacy, analyze the economic detail and last but not least develop and execute a robust post merger integration.
One of the first things they agree upon is the exact location for their outsourcing business. Investors will start with all countries/outsourcing destinations that would meet their needs and desired requirements. The states with high geopolitical risks, little or no ability to provide major European/Asian languages or with no labor arbitrage will be eliminated.
If focused on Eastern Europe, on counties that are members of the EU, the investor’s criteria revolves around demographics (literacy rate, foreign language literates, labor pool ), economic risks ( economic stability, taxes, country brand ) and business requirements (competitivity, BPO focus, connectivity ).
Romania through an investor’s eyes
The Romanian outsourcing market is stable and the BPO industry is one of the strongest industries in our country today, with an estimated continuous growth of 20 – 30% up until 2015.
Romania takes the second place in Europe, after Poland, in terms of business services outsourcing, is listed in the Top 100 Outsourcing Destinations of the world – placed on the 40th position, has affordable costs and great benefits, talented and dedicated professionals, great labor pool and wonderful language capabilities. Moreover, Romanians are world known for their flexibility, cultural adaptability and for the fact that they can easily relate to other cultures and working standards.
An investor will also be concerned about workforce key elements: attrition rate ( in Romania this particular rate is very low: 10% – 30%, stating stability and professionalism), fidelity towards the employer ( in our country 40% of employees stay less than 1 year with the company, the other 60% continue to work for more than a year in the same working place) and University graduates ( Romania currently holds a top position from this point of view, with 311k / year, the highest number in Eastern Europe ).
Certifications are also extremely important and will weight heavily on an investor’s list! Romania has talented and young professionals that function as a resource! They hold certifications in business analysis, project management and finance. The majority is proficient in English and their training curricula include leadership and performance management.
For every company the right time to outsource is different. But we should always remember that investing in outsourcing means investing in one’s image, staying one step ahead of the competition and ultimately insourcing best practices! Making the choice to outsource can provide the company with the freedom to focus on its core functions, gain time to develop and achieve constant improvement. If the process of choosing the perfect outsourcing destination and managing the operations in this direction seems unsettling, do not be intimidated! You are most probably on the right track! It takes time and energy, but with the right outsourcing advisors, a clear business strategy and determination, the desired results will always be visible!
Article published in the online and printed version of Business Arena Magazine – businessarenamagazine.ro