A definitive insight into the options and benefits of
outsourcing business services and the growth of
s-commerce as a viable way of buying services
Guide to
So, you’ve got an exciting new project. Everyone’s ‘on board’, the finances are in place and research indicates that your product or service could be a winner, or alternatively your new operational system could make all the difference to your bot-tom line numbers. Now’s the time to put your proposal into practice – but what’s the best way to go about turning that idea into a reality? Keep everything in-house, buy in services, or outsource?
When you’re continuously going back to the same service providers, outdated business processes are quite possibly leading to some of the best ideas going unheard. It is clear however, that great ideas have never been more important. The business landscape is more competitive than it ever has been with the breakdown of barriers to international compe-tition and markets. So how does your business stand out from the crowd?
Buying Services
An introduction
Buying external service providers is about trusting your busi-ness process to a partner. Outsourcing partnerships should adapt to your business model and should also be flexible enough to accommodate your changing business needs. Al-lowing a new service provider to fulfill your project needs, will give you a fresh view on your business demands and provide your business with the opportunity to improve performance.
Our guide to buying services can help explain your options and take you through your options.
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Outsourcing can give your business a more innovative and fresh approach towards managing your projects.The Big Stuff
Different outsourcing models
The reasons for outsourcing chiefly fall into providing activi-ties that can’t be done by in-house teams, or because there are efficiencies to be gained by not doing everything in-house. Let’s assume that you’ve decided that, as great as your work-force is, you still need to delegate some of your operations to third party suppliers. Initially, the worry about the cost can prevent many businesses (particularly SMEs) from choosing the most practical and pragmatic option – outsourcing.
For most business, outsourcing is a large scale decision. It’s not about finding a supplier to deliver something that adds to the business; it’s about taking a business function outside. Although as we shall see, the outside is sometimes inside.
Let’s start with the different
outsourcing models :
Probably the most cost-effective option for operations such as accounting, payroll and financial operations. But you can also fully outsource a variety of processes, such as manufactur-ing, IT management and catering services. However, careful guidelines have to be established at the beginning to ensure that you’re getting the right service at the right price.
Off-site or On site ?
Full off-site outsourcing
This gives you more ownership over the process you outsource to your partner, as the operation is performed at your place of business. Again, most common onsite outsourcing processes include accounting and monthly payroll.
Both these work really well when you want to take a full func-tion out of the process, but how do they work if you just want an element of a function. Or a single service.
This is often a much closer working partnership with your out-sourced provider, as outsource staff work alongside internal operators. It can help to reduce staffing costs (only calling in outsource staff when needed, rather than keeping full-time staff on the payroll) as well as giving you greater ownership of the process.
This is really a solution for talent or resourcing shortages, rather than a solution for fulfilling a service. It doesn’t deliver a complete service as such, but fills gaps in your existing re-quirements.
Although you retain control, it can often lead to over-reliance on certain providers at key periods. In time this can lead to costs where you need to retain providers without actually needing their services at a given time which leads you to be-ing in a position of over-staffbe-ing, rather than under-resourc-ing.
Often referred to as SWAT outsourcing, this option allows you to call in a team of outside providers at short notice to tackle a specific issue or project, whilst also allowing you to work with them to plan for longer term options.
For most businesses this is often the start of a long-term supplier re-lationship. However this also is still normally personnel led. It’s skills the business doesn’t have, or can’t manage in-house.
At the other end of the spectrum we lead from these models based on specific resource and functional requirements to moving out an entire business process.
BPO or Business Process Outsourcing is more specific than general-ized outsourcing, in that it focuses on one particular process such as logistics, manufacturing or design. It’s broken down into two catego-ries:
Back office BPO – internal functions such as HR, payroll, accounting
Front office BPO – ‘front-of-house’ processes such as customer service, call centers or external processing
BPO can cross international borders, for example companies based in one country who have outsourced their customer call centers to locations such as India.
BPO is a growing sector. The National Association of Software and Services Companies (Nasscom) predicted that the ITES-BPO sector would grow internationally by 11-14% during the last year, and that indicators suggest that this figure will be exceeded in coming years.
Complete BPO
The continued development of cloud-based solutions and crowdsourcing, particularly in tendered projects Data analysis to support the banks, financial services firms and insurance companies
A more efficient and effective BPO industry structure, with expertise across different vertical markets
A predicted growth rate of 15% in emerging sectors, particularly in data analysis and management, accounting and legal services
For many businesses the aim isn’t to outsource a team, or a function, but to find outside suppliers to deliver the service. While this may be done on a project basis, for ad-hoc reasons, or for more complex needs, it also results in long-term relationships and for larger compa-nies, the need to formalize these relationships beyond a departmen-tal procurement.
Constructing a strong relationship with service providers depends on a two-way process that builds up solid supplier frameworks. To do this, your business needs to set measurable parameters internally, be-fore buying in services to fit. By establishing a ‘baseline’ first, it is much easier for those tendering to supply your services to construct their bids effectively.
For most procurement functions the holy grail is the preferred supplier list. It tends to be refreshed and updated on a regular, fixed-time period and in between those times, it’s only under exceptional circumstances that a new supplier can cross into this territory.
The business benefits from having negotiated fixed terms and contracts so that any purchasing manager will be able to know exactly what they can or expect to pay and what and who will deliver.
The downside is to both buyer and supplier. The buyer struggles to bring in new skills and expertise. This is often seen when specific new project requirements are identified which are outside the scope of existing suppli-ers. Most of those on the list will offer them, but frequently via their own sub-contractor partners. The result is that the buyer has less control over both quality and cost of deliverable.
For the supplier it means that they are limited in who they can work with. Their opportunities are limited to those businesses that don’t operate this approach or they act as those sub-contractors.
While the preferred supplier list will continue to be at the center, it’s an approach that may need to be more flexible as more companies outsource on a project basis.
The preferred supplier
Buying services
The key reason to buy in external services is to ensure that a new project is a success. The initiation stages of any project are a golden opportunity to assess whether it should be handled entirely in-house, or whether bringing in external service providers to cover key areas of the venture is a more cost-effective and time-efficient option.
Project-based service buying is usually put out to tender to allow provid-ers to bid. Remember that, although important, your decision should not rest purely on the cost. Major organizations have learned the hard way that ‘lowest bidder syndrome’ can end up costing much more than money – it can also lead to a damaged reputation.
Research found that while nine out of ten decision makers believed better service providers were available outside their existing network, nine out of ten were equally still likely to approach their existing service providers when a new project arose.
Perhaps unsurprisingly 93% of decision makers said they would like to find a new service partner but 83% felt that the procurement process prevented them from being able to achieve this; and 75% admitted that pressure from within their organisation was a barrier to working with new service provid-ers. Businesses are limiting themselves to a small group of suppliers who have little or no incentive to give an improved service and consequently improve the competitive edge of their customer; whilst businesses that of-fer real competitive edge are being shut out from the contract-awarding process, effectively barring and deterring innovation and improving busi-ness performance.
Traditional ‘face-to-face’ or word-of-mouth service buying is still a key com-ponent of the equation. But more companies are finding that tendering through cloud-based or crowdsourced service exchanges gives them a greater number of options, whether they’re looking to buy in a wide range of services, or just focus on one aspect such as payroll, logistics or account-ing.
Some businesses are reluctant to embrace crowdsourcing because of the fear of low quality providers, or concerns over IP issues. And the world is full of tales of the plagiarized logo used in competitions.
However crowdsourcing has come of age and becomes a significant op-tion for b2b services buying. The flavor of expertsourcing, where the crowd is actually pre-selected based on skills, expertise and credentials, means that the model becomes appealing to both buyers who want access to the minds of many, or the choice that this extended list gives them without the research; and to sellers who are able to establish their background while opening up opportunities.
The rise of s-commerce
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With a helping hand of technology the recent growth of s-commerce is providing a new streamlined way for businesses to buy, manage and pay for their core services via an online plat-form.Innovators can be found in many small businesses and their ideas can pro-vide, in many cases, competitive advantages to larger businesses. Services commerce (otherwise known as ‘s-commerce’), gives businesses the chance to find the right service provider for a competitive price.
With a helping hand of technology the recent growth of s-commerce is pro-viding a new streamlined way for businesses to buy, manage and pay for their core services via an online platform. This ensures the best ideas to shine through regardless of the provider, meaning that the most suitable company is selected rather than one that happens to have an existing re-lationship. Providing a level-playing field when it comes to business pitch-ing encourages innovation and competitiveness and gives small business-es that provide superior products or servicbusiness-es a chance of competing with larger businesses.
At blur, we have seen project-based services buying expand rapidly over the last two years.
Our metrics showed 2,086 projects were submitted for 2013, a stag-gering 168% annual growth compared to the previous year (776 projects).
With a total value of those 2,086 projects of just under $100million in 2013, this is a significant increase compared to the total project value of 2012 ($10,25 million).
The demonstrates how buoyant the project-based services buying sector is, and as a result the number of experts joining service ex-changes to bid for contracts is increasing. This is also a strong demon-stration of the growth in popularity of crowdsourcing for buying ser-vices. A dedicated forum such as a services exchange provides both experts and tendering companies the chance to meet in the Cloud and make those all-important connections, regardless of geographic location.
Unlike many of the other models, s-commerce is more transactional and has given rise to the concept of Software as a Transaction
Keep an eye on tomorrow and
join the movement.
The increasing acceptance of s-commerce as a viable and useful commercial tool means that now is the ideal time to initiate a shift in the procurement processes of your business. The process provides the opportunity for innovation which in itself may provide a competi-tive edge and a further benefit is that it reduces waste and costs.
www.blurgroup.com US: +1 (855) 702 8794 INT: +44 (0) 800 048 8664
