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Quashing conventional wisdom about outsourcing

A recent survey by Grant Thornton has found that while conventional wisdom might suggest typical outsourcers to be small businesses looking for providers in low cost jurisdictions, reality paints a different picture.

Grant Thornton has released its annual International Business Report on outsourcing (IBR) entitled Outsourcing: Beyond technical expertise.

The IBR surveyed 2,571 business executives from 36 economies from around the world to explore what companies look for in their outsourcing relationships.

Amongst the IBR's key findings is the fact that intangible factors such as reliability, trust and soft skills count more than technical factors such as cost, in making outsourcing relationships work.

Indeed 56% of respondent said that the service reliability was the most important criteria when selecting an outsourcing provider against 43% of the respondent citing cost.

Grant Thornton UK head of outsourcing Samantha George said companies that outsource expect their providers to have all the specialist skill and IT system needed to deliver the contracted services.

Therefore, according to her, the softer and less quantifiable elements of an outsourced relationship are the ones that make the difference.

"As in any relationship, trust and communication remain vital to its success," George said. "With outsourcing increasingly on the agenda at international companies, the best providers will have progressed from offering a commoditised service based on price, to truly gaining the confidence of their clients as a strategic partner."

Consequently companies have also shifted their focus when choosing an outsourcing jurisdiction, the survey has found. "A decade ago, the attractions of outsourcing to India, especially, was all about cost." Grant Thornton's report reads. "Today many companies realise that this is no longer the only consideration - it's about being in a strategic location to serve our markets, accessing the right talent, and getting a good cultural fit for your needs."

Services in demand
IBR also revealed that payroll and human resources are the most common processes to be outsourced, with 34% of respondents currently outsourcing those processes.

On the other hand only 27% of the surveyed businesses outsource or plan to outsource finance and accounting processes.

According to the IBR, the fear of giving away control over critical aspects of internal reporting as well as confidential financial data is the main reason for the businesses' reluctance to outsource those processes.

However this is not the case in Latin America as 55% of the businesses surveyed in the region currently outsource finance and accounting services. According to the IBR new and tougher regulation in tax and anti-corruption associated with audit requirements are the driver of this strong demand in the region.

Outsourcing for all size
Another key finding of Grant Thornton's IBR is that all companies regardless of their size have outsourcing needs.

IBR found that outsourcing of back office processes, finance and accounting as well as payroll and HR, is equally prevalent among companies employing less than 200 people and businesses employing more than 200 people.

"Companies are also realising that they gain, rather than lose control when they outsource functions, because they can have their providers report to them on a frequent basis and request information in real-time," George concluded. "This leads to a more open and engaged relationship between both companies and one which is more likely to succeed."

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