What Hinders Businesses to Outsource?
Previously, we talked about the drivers to outsourcing, with some variations of results from the type of the economy and the company size. Now, we will discuss what impedes businesses to outsource their back office processes.
The research by Grant Thornton also found out that the major obstacle in outsourcing among the three-fifths of businesses with no plans to outsource is the unwillingness to lose control of a key process. This is cited by 44% of respondents (rising to 49% in larger businesses) and emerges as the chief barrier in every region except Latin America. Interestingly, this is more of an issue in developed markets with 50% of those in the G7 citing this lack of control as an obstacle, compared with just 35% in the BRIC economies. This obstacle is highest in North America (58%) and also elevated in Europe (47%).
Furthermore, another study by Jane C. Linder, former director of research at Accenture, reveals that the thing that most executives fear losing control of is operational performance, which was twice as important as the next most-named answer, personal influence. The other factors cited are knowledge, and customer and supplier relationships.
While some companies are reluctant to lose flexibility with internal processes, they also fail to consider that outsourcing can actually increase management’s control over certain operations. When you turn over key business functions, you will have a better understanding of your company’s financial position and make better decisions.
According to Samantha George Grant Thornton UK, “There is a popular misconception that outsourcing a process means a company loses control. In fact, outsourcing can actually help leaders take a step back and gain a clearer picture of how the business is performing against its strategy.”
The same study by Linder also shows that executives at companies that have outsourced key business functions listed seven major areas in which their companies have actually gained control:
While it may be risky to have another company manage some of your internal processes, remember that you still have the power to set the direction and communicate your expectations with your providers. Outsourcing does not take away your control; it just shifts the process of information.
The Outsourced Accountant supports Australian and New Zealand accounting firms by helping them understand and implement outsourcing solutions to help them become more proactive and truly add value to their clients. If you want to know more about outsourcing, call us at 1300 896 522, and download our e-book.