Why Outsourcing Does Way More Than Cut Costs
Recently Bain & Co. conducted a study of more than 2,000 firms over ten years. They wanted to find out how many of those companies managed to sustain profitability over that entire period. According to their research, only ten companies managed to do so. And so, the question naturally arose, what was it that set these companies apart? When the firm drilled down into the data, they discovered that it was the way in which they outsourced various tasks.
From a SEO firm in Toronto to your local IT agency, outsourcing has typically been seen as a way to cut costs. Businesses like headline figures, such as “outsourcing reduces IT costs by 30%.” But the firms that did the best in the Bain & Co. survey were the ones using their partners in intelligent ways. They looked beyond mere cost-cutting and instead focused on building capabilities. So, what insights can we glean from what they did?
They Tap Into Global Talent
Shortages of talent can really hamstring businesses that want to grow rapidly. Take Texas Instruments, for example. It found that it wasn’t able to source the skills it needed to grow from the American market. And so it partnered with an R&D center in India. This then gave it access to a stream of potential talent it could poach for its own business.
Continually Monitor Partners
The best companies constantly monitor their suppliers to make sure that they are meeting legal standards. Take the food business, for instance. Food is heavily regulated. And a single case of food poisoning in the press can be devastating to the underlying business. Food producers need to be all over their partners, making sure they’re using hygienic tube conveyor solutions. The same level of oversight should be practiced by those in other high-risk industries, like the toy industry. Take toy manufacturer Hasbro, for instance. It was one of the few companies in the sector that exercised sustained oversight and made sure safety was a priority. When the lead paint crisis hit the industry in 2007, Hasbro wasn’t affected. It had ensured that its manufacturer wasn’t using lead paint.
Ability To Seize New Opportunities
Getting a foothold in a new market is never easy. But, thanks to some clever partnerships, AstraZeneca managed to do just that. The company predicted the boom in the Chinese pharmaceuticals market. And so it began partnering with universities, Chinese businesses, and government departments. As the market began to take off, AstraZeneca had a presence at all levels of Chinese business. Thus, it became the preferred supplier of new drug innovations to the country.
Outsourcing To Disrupt Industry Models
Back in 2000, Acer wasn’t a well-known computer company. Sure, the Taiwan-based firm had a range of products, but it was no Dell or HP. Things began to change, however, when it let go of its manufacturing arm. Acer knew that it wasn’t all that good when it came to building the components required for its electronics. But it did know that it had significant strength in advertising and marketing. Since reinventing itself, Acer has grown significantly. It’s now the world’s second-largest maker of PCs.
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