With economic growth in South Africa being hampered by rising interest rates, inflation and critical skills shortages, many companies are under severe pressure to deliver the level of results that shareholders have become accustomed to over the last few years.
According to Donovan Muller, head of Accenture's South African Outsourcing Growth Platform: "Companies that will survive and thrive in times of economic uncertainty are ones led by senior management who are prepared to implement decisive measures to both streamline costs and improve business performance.
"Outsourcing in such times provides companies with the potential to address cost and resources issues as well as better position themselves for growth. It can also create transformational opportunities that drive high performance, generate added revenue, address staffing challenges and create sustainable long-term advantage."
Recent global research done by Accenture shows outsourcing not only helps a business to contain costs, it also allows companies to grow. This is due to the ability to gain strategic advantages over the long term by allowing them to focus on improving core competencies relative to the competition. Of the 35% of companies whose objective it was to use outsourcing to enable them to focus on core business, 75% achieved this objective.
"Around the world, companies are seeing numerous benefits to outsourcing during an economic downturn. Accenture's research has also found that businesses have been able to reduce 'fixed' costs and seek the 'variable' cost basis that outsourcing provides. Of the 67% of businesses who wished to use outsourcing as a way to cut costs, 71% achieved this objective," comments Muller.
He adds that the concept of 'bundling' is becoming increasingly popular in achieving a consolidation of key functions. For example, research has shown that the large majority of human resource outsourcing contracts now include technology components. This type of integration of functions through bundling, allows for reengineering and streamlining of entire processes. Of the 48% of companies who wished to use outsourcing to improve businesses processes, 65% achieved this objective.
"In South Africa, with strong IT skills being increasingly rare and expensive, managing these IT and infrastructure requirements through outsourcing allows companies to transform business-critical applications/processes to achieve higher performances," says Muller. "Over 40% of IT outsourcing contracts today combine infrastructure and application development and maintenance, up from less than 30% just three years ago.
"So while outsourcing can certainly be a valuable tool to cut costs, it also allows your business to improve, achieving sustainable and measurable growth, when other companies are tightening their belts," he adds.