I believe in the opposite; outsourcing is clearly a growing trend in the mid-market. Companies in this segment are increasingly partnering with outsourcing providers with the intention to lean their back office processes.
OpusCapita provides outsourcing services to large and mid-sized companies across multiple industries in Northern and Central Europe. Our experience is that mid-sized companies, similarly to large enterprises, experience a growing pressure to drive continuous improvement. They are expected to deliver quality outcomes at maximum operational efficiency.
Modern back offices are cloud-based, mobile and to a large extent peopleless. Automation has allowed a fundamental shift in the role of finance, from being a transaction engine to becoming a business intelligence center. In modern back offices, competent and skillful specialists spend their time on value-added and strategic activities instead.
Gateway to newest technology
For mid-sized companies, outsourcing can be one gateway to a modern back office. Service Providers develop and deploy new technology for their living, and may already have moved up on the learning curve which you are just about to start.
Also, providers are likely to take an end-to-end view of your processes, building them flawless from start to finish. Take purchase invoices as an example. You may have reached world class with a high number of electronic invoices, but yet your transaction cost is well above average.
No matter how sophisticated your electronic flows are, the process will remain manual if (for example) your order matching is broken.
Thorough process development may cause substantial investments in various parts of the workflow. Mid-sized companies may find them just too heavy and capital intensive. In fact, mid-sized companies are the ones to benefit most from the economies of scale in outsourced solutions.
Many of them consider outsourcing as an alternative when their enterprise systems have reached the end of their life-cycle. Whilst you could spend months in implementing a systems, the provider can roll you onboard just in weeks. Besides, the service provider commits to continuously develop these solutions for you, all part of the deal.
Lesser personnel risk
One other reason why our clients outsource is mitigating personnel and resource related risks. In mid-sized companies (also occasionally in larger companies) critical tasks often rely on a few key people. One specialist can wear several hats, looking after a wide range of tasks, all the way from routines to advanced analytics. Such multi-taskers become irreplaceable, which pose a risk to the continuity of the operations.
Service providers can back up the critical skills and competences, and offer them as continuous service or on-demand. Very often the driver for outsourcing is a desire to release the specialists’ time for the more strategic and value-added tasks, which also make a better match to their competence and compensation levels.
Companies may also be inclined to outsource in scenarios where speedy implementation is needed. We have supported our clients in running integrations subsequent to company mergers and acquisitions or separations followed by divestments. The provider’s commitment to an extreme timeframe, their ready-to-use solutions and pool of resources may in these situations be invaluable to the customer.
Alternative outsourcing models
In most cases outsourcing isn’t kicked off as a “big-bang” transfer. Instead, hybrid outsourcing models are emerging. In practice they mean partial outsourcing and shared responsibilities. The key is to select an outsourcing partner who will commit to a development plan and have proof of successfully driving such programs. A smart provider will a take wider view over the client operations and focus on improvement and automation, not outsourcing alone.
In fact, new technologies enable much lighter outsourcing models. No need to go all the way to offshore to be efficient. Actually, no need go anywhere at all. Robotic Process Automation (RPA) will fundamentally change the way providers work. The trend goes from offshore to no-shore. Robot software can navigate in the customer system combining external and internal sources of information, and completing tasks 10 times as fast, 24 hours, 365 days a year.
Whilst you traditionally would spend weeks if not months in order to make substantial process improvements, with RPA this happens only in days. If you are interested in learning more about how we have implemented RPA in payroll accounting, check the latest edition of our customer magazine.
RPA is just one of the many means to come. Modern providers are powered by cloud-based platforms, mix of smart automation tools and analytics solutions.
At the same time, modern providers demonstrate a strong ability in understanding the client’s business and can respond to specific business challenges the client faces. The solutions provided should not focus only on cost reduction, because those tools are already there, but look into how to build innovative solutions improving business outcomes, and support client in decision making. More about this in my next blog.