Inside or outside? The strategic value of outsourcing in 2024

Outsourcing is more than just catching an expert by the digital tail and swinging them into the enterprise, it’s a strategic investment into a long-term collaboration.

Outsourcing essential business operations across multiple departments and functions has proven its strategic value as service providers refine their offerings and enterprises adapt their use cases and perceptions. Helping organisations to optimise processes and save costs, outsourcing has evolved alongside the market and enterprise expectations. It is now smarter, says McKinsey, as companies outsource to ‘capitalise on more sophisticated provider offerings’ and thereby open their corporate doors to advanced digital solutions such as AI, robotics, automation, analytics and machine learning. It also, reminds Mandla Mbonambi, CEO of Africonology, of a strategic way for organisations to remain focused on their core business operations and activities while trusting services and solutions to the capable hands of a trusted service provider. 

“Outsourcing can be an invaluable asset,” he continues. “However, it needs to be approached with realism. No solution or service is without its pros and cons, and outsourcing is no different. For an organisation to benefit from an outsourcing partnership, it needs to understand both the benefits and the drawbacks of this approach to ensure value is created.” 

The benefits are significant and long-term, particularly if the relationship between the service provider and the company is solid. Then, benefits such as lower labour costs and reduced labour risks, will be felt by the organisation over the long term. When a company opts into outsourcing from a service provider to undertake specific tasks, it doesn’t need to hire permanent consultants or skilled employees to bolster its capabilities. Instead, the service provider steps in with a full crew complement populates short- and long-term projects with the right talent and removes the risks that accompany the management, hiring and engagement of staff. 

“The company outsourcing the work doesn’t have to worry about employment benefits, packages or retention, they just hand those problems over to the service provider,” says Mbonambi. “This approach also allows for organisations to focus more on the core of their business while non-core, yet essential, roles and projects are managed externally within specific timelines and budgets.” 

Wedded to the management and retention of talent is the delightful benefit that the company no longer has to wade into the battle ring and fight for top-tier talent. Instead, specialised, highly skilled and experienced talent is wooed and curated by the service provider while the company gets all the value from having hands-on access to a smart and capable workforce. 

However, stepping into the world of outsourcing does ask that both the service provider and company are aware of the risks. Sensitive data can be tricky to manage within the context of outsourcing – how should this data be handled by a third party, especially if they’re offshore? What about the risk of intellectual property? Despite the proliferation of non-disclosure agreements and contracts designed to mitigate this risk, it doesn’t take away the potential for someone to share this information with someone else. 

“These are considerations that must be prioritised before stepping into an outsourced relationship,” says Mbonambi. “They will add to the security costs required to protect sensitive data and demand that companies create solid and open channels of communication designed to reduce the risks of information leakage and loss. That said, communication can also be a catch point as some outsourced companies may not share the same culture or language and this can affect the relationship and add to the risks.” 

Finally, one of the challenges that needs to be considered by both parties when moving into an outsourced relationship is the contractual agreement. This includes Non-Disclosure Agreements binding both parties in handling all activities and materials confidential. These can be rigid and complicated and can require that companies follow stringent legal processes before making any changes or shifting in a new direction. 

“This doesn’t mean that outsourcing is going to end up being a complicated tangle of terms and conditions,” concludes Mbonambi. “Understanding the risks and recognising the benefits allows for both company and service provider to approach their relationship intelligently and with transparency. Open communication, clear visibility into services and expectations, agility and flexibility baked into the relationship to allow for shared growth and understanding – these are all key to building a relationship within the outsourced model that will thrive long after the ink has dried.”