Outsourcing Marketplace Drivers for Continued Growth
While the outsourcing marketplace is highly fragmented; it is poised for enormous growth in the small and mid-market over the next decade as companies fight to maintain their competitiveness and profitability. The major drivers for this growth include:
- Costs: As competition in your industry sector and/or region intensify and cost pressures continue to escalate; everything from rising benefits and healthcare costs to labor arbitrage to the cost of capital for companies is continuing to widen.
- Competitiveness:
All businesses have limited resources that must be narrowly focused on developing the core business.
- Demand for Service Level Agreements (SLAs) to ensure quality is managed and controlled.
- Knowledge and access to intellectual property.
- Access to operational best practice that would be too difficult or time consuming to develop in-house.
- Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.
- An organization can use an outsourcing agreement as a catalyst for major step change that cannot be achieved alone (i.e. the outsourcer is the change agent in the process).
- Agility: Markets and industries change. The need to be able to respond to changing macro, competitor, customer, talent, and supplier change is an imperative for any business operator that takes a pragmatic view of their risks.
- Scalability: the outsourced company is better equipped to handle fluctuations in capacity and utilization.
- Outsourcers improve operating leverage (a measure that compares fixed costs to variable costs) by offering businesses a move from fixed to variable cost and also by making variable costs more predictable.
- An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.
- An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.
The outsourcing marketplace is a multi-hundred billion dollar industry encompassing tens of thousands of providers selling hundreds of different products and services. When you consider that virtually every business outsources some business process, you can appreciate the total size of this unique marketplace. If you are an outsourcing provider, aggressively targeting small business and the mid-market enterprises, it is critical to secure your position of this marketplace. Read more outsourcing trends here.