As the economic downturn bites, many companies will be looking to outsourcing as a way to cut their costs – but they should seize the opportunity it presents to gorw their businesses as well.
"In a global downturn outsourcing is perceived by many decision makers as a key opportunity," says Pule Mokoena, group executive at Innovation Group. "For companies fighting to ensure not only survival, but prosperity – especially relative to rivals facing the same challenging conditions – outsourcing is often hailed as a cost-cutting silver bullet.
"As the world gets to grips with one of the biggest economic downturns in history, many changes can be expected in the way financial services and insurances brands in particular face a range of serious challenges. We can, of course, expect to see a significant change in the way these brands develop new products and go about communicating with their consumers around these products.
"The days of flashy appeals to the credit-driven ego are over – for now – and there is little doubt we will see more humble and sincere advertising campaigns from financial services and insurance brands in the market."
But underneath this external veneer he believes the marketplace can also expect some serious outsourcing thinking to be going on from the major players when it comes to increasing their core competency capability and streamlining operations to lower costs.
Donovan Muller, head of Accenture's South African Outsourcing Growth Platform, recently cited his company's research in this area in the media.
"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 … 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."
Clearly then, outsourcing can help companies in dealing with tough conditions, says Mokoena.
"BUt, while it is commonly understood that outsourcing can strengthen the operational core of an organisation, and thus insulate it against the perils of a downturn, it is less commonly understood that outsourcing – especially when it involves a relationship between a consumer brand and a specialist partner that truly understands the brand's business – offers other opportunities.
"New product development, specifically, is often an area of opportunity overlooked in a downturn. But really, if structured to meet the evolving needs of consumers (which in a serious downturn will always revolve around a mix product value and cost), new products can be especially appealing within the paradigm of the grudge purchase."