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Business Pulse: How South West businesses are using outsourcing to their advantage

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Written by: Gavin Thompson | Posted 17 March 2016 15:00

Business Pulse: How South West businesses are using outsourcing to their advantage

How do Bristol companies use outsourcing to their advantage? The latest Business Pulse Survey special report published today by accountancy and business advisory firm BDO LLP and the Bristol Post, takes a look

OUTSOURCING has been increasingly common over the last ten years and is now growing exponentially around the world.

The reasons are many as organisations seek to redirect strategic internal resources, to reduce operating and investment costs and to gain access to much-needed talent.

In the UK, large numbers of both public and private sector organisations are increasingly adopting an outsourcing approach, largely for activities where there are cost advantages of doing so or where outsourcing provides access to expertise not available in-house.


 

Why do you outsource?

To reduce costs 28%
To focus on core business 28%
To tap in and leverage global knowledge bases 3%
To gain access to resources not available internally 34%
To delegate functions to a specialist 41%
Other 3%

Are you considering outsourcing any part of your business over the next year to 18 months?

Yes 20.5%
No 79.5%


 

Many organisations in the Bristol and South West area are also outsourcing with 59 per cent of those taking part in the business pulse survey currently outsourcing a part of their business.

Kerry Hallard

Kerry Hallard, pictured, CEO, of the National Outsourcing Association confirms similar findings. He said: “In a recent survey of our membership, conducted as part of the NOA’s Outsourcing in 2020 research, we found that 70 per cent of organisations are going to increase their use of outsourcing – 35 per cent plan to do so significantly. This confirms what we already suspected: outsourcing will become even more popular as a business practice between now and 2020.”

Of those organisations that outsource by far the biggest area of the business to be outsourced is payroll with over one third doing so, closely followed by IT and manufacturing by nearly a quarter of respondents. HR outsourced is by a further 18 per cent.

Other significant areas of the business that are outsourced are finance (15 per cent) and sales and marketing (15 per cent).


 

What part of the business are you considering to outsource?

Finance 73%
Payroll 4%
HR 8%
Sales and Marketing 8%
IT 8%
Manufacturing and production 12%
Design 12%
Other 8%


 

Duncan Ashman

Duncan Ashman, pictured, global outsourcing partner at accountancy and business advisory firm BDO LLP, said: “We have seen a substantial increase in interest in outsourcing services over recent years and have a large number of clients outsourcing tax compliance, accounting and payroll both in the UK and overseas.

“Of particular interest are centrally managed services in overseas countries. Our growing Bristol-based team is able to provide local expertise in any country but with all the benefits of a UK-based relationship and a single point of contact.”

Of those who outsource nearly three quarters outsource in the UK with 19 per cent outsourcing to Asia and 16 per cent to Europe.


 

Where do you intend to outsource?

UK 88%
Europe 13%
USA 25%
Asia 13%
South America 13%
Africa 13%
Australia/ New Zealand 13%
Other 13%


 

We might expect that the major reason to outsource would be to reduce costs but in our survey this is not the case. Although 28 per cent of organisations surveyed gave cost saving as a reason to outsource, for a greater number (41 per cent) the reason was to delegate functions to a specialist followed by gaining access to resources not available internally for 34 per cent.

Juan Pablo Luchetti consultancy director at Clifton based app developer Mubaloo, said: “Traditionally, outsourcing is used to lower the cost of business functions that are standard across many businesses. These include HR, IT and lead generation, where companies will use specialist companies that can help them meet their goals, whilst lowering costs. When it comes to digital transformation, we see outsourcing evolving.

“Companies may choose to outsource to gain the confidence and expertise to help them discover and deploy the right tools and technologies that will help their business to move forward. Sometimes it’s because they want the benefit of being the first mover and disrupting their industry. Sometimes it’s because they realise if they don’t do it, they will fall behind. Others are pushed to do it by the market, reluctantly.”

Kerry agrees: “Cutting costs is traditionally seen as the prime reason to outsource.

“However, BDO’s survey found that’s not necessarily the case in the Bristol and South West area, and this coincides with our own research. Across the UK, we saw that a quarter of organisations that outsource now do so primarily to improve the customer experience they offer.

“Customer-centricity and great data management are the new top priorities for most organisations – through the use of best-of-breed service providers, these goals become far more achievable.”

A fifth of businesses surveyed were considering outsourcing any part of their business strategy over the next 12 to 18 months

Of those businesses looking at outsourcing over the next 12-18 months the vast majority, nearly two thirds are looking at outsourcing finance.


 

What part of the business do you outsource?

Finance 15%
Payroll 35%
Customer service 4%
HR 19%
Sales and marketing 15%
Logistics 8%
IT 23%
Manufacturing and production 23%
Design 12%
Packaging 4%

Why are you considering outsourcing?

To reduce costs 29%
To focus on core business 29%
To gain access to resources not available internally 43%
To enter new markets 14%
To delegate functions to a specialist 57%


 

 

The vast majority (88%) of those looking to outsource over the 12 to 18 months were looking at outsourcing in the UK, with the USA being the next most popular place being considered. One respondent said, “We don’t deliberately select a given area; we work on availability of key resources”.

For businesses considering outsourcing over the next 12 to 18 months reducing costs is not the main reason to do so. Delegating functions to a specialist is the most important for nearly two thirds of respondents followed by gaining access to resources not available internally for 43 per cent.

An exciting new resource for businesses in the West of England that are thinking of outsourcing was launched in Bristol recently. This is a new online portal offering a one stop shop for local business support and outsourcing.

This new concept for the region, The West of England Growth Hub, aims to revolutionise business support, creating a web-based community linking support providers and outsourcing organisations with SMEs.

Sam Bell, project engagement officer at the West of England Growth Hub, said: “Many small and medium sized businesses do not have the internal resources or expertise to manage the processes needed to grow their business.
“The West of England Growth Hub provides instant access to a network of growth support to help our local business community confidently expand and grow.”


Do you currently outsource any aspect of your business?

Yes 59%
No 41%

Where do you outsource?

UK 74%
Europe 16%
Asia 19%
Other 4%


 

Case study: SD Sealants and Mubaloo

Mubaloo

Pictured: Mubaloo managing directors Sarah Weller and Gemma Coles

SD Sealants is a family run business, first established in 1973 in Somerset. Since then it has steadily grown to be one of the largest, family run sealant specialists in the UK with eight offices across England, Scotland and Wales.

Bristol-based Mubaloo is a mobile consultancy and enterprise app developer, which helps companies transform their business processes through consultation, development and deployment of mobile applications.

Mubaloo worked with SD Sealants to create a new app with the aim of helping the organisation double in size, reduce pressure on admin staff and improve the field force work process.

Prior to the app, SD Sealants applicators would use a transfer paper pad with four sheets that would need be posted to the head office at the end of each week.
The process would see documents get damaged or lost in the post, not to mention adding to the time it takes to process orders.

The app has been created to make operating model more efficient, helping the business to grow.
It allows SD Sealants applicators to input job information on site, add photos and additional details to job files, access payment information and deliver information back to head office in real time.

The app enables the firm to improve overhead recovery, reduce errors and allow the company to expand its service offering, including integrating the firm’s recently launched cosmetic repair business.

Mubaloo worked with SD Sealants at every stage of the process from defining strategy behind the app, right through to development and deployment.

The app is now being used by SD Sealants applicators across the UK, leading to a huge amount of improvements to both internal intelligence but also time saving.

On average, the app has freed up an extra five hours per worker on a weekly basis.

It has already helped the business to expand with a 25 per cent growth in turnover with no additional overhead to manage this expansion required.

The outsourcing of this development has significantly added value to SD sealant and the opportunity to grow without being concerned about additional investment in admin or processes.


 

Cast study: Capita Asset Services 

Capita Asset Services has the largest professional services company secretarial team in the UK. It predominantly offers financial outsourcing services to a wide range of institutional, corporate, financial, fund and private clients worldwide.

The business employs circa 8,000 people in the UK and internationally.

Whilst Capita can provide a “one-stop shop” fully outsourced solution, much of the work is based around working in partnership with existing secretariats, providing them with access to a wider, technically competent team that is both flexible and scalable.

The main challenge to outsourcing company secretarial services often comes from the secretariat itself.

This is often born from a lack of understanding and a fear of being replaced.

Supplementing, rather than replacing, existing resource provides assurance to organisations and flexibility, particularly during peak periods and one-off projects, that would otherwise be difficult to achieve.

The company secretary’s role is frequently viewed as niche and teams are often very small and overburdened.

Heavy reliance on key individuals raises concerns with senior management and boards, whilst the inefficiencies that exist when individuals are required to fulfil senior management roles and also carry out basic administration can be difficult to reconcile.

Cost is always a consideration, but is not the main driver for seeking outsourced company secretarial services, with most clients looking to utilise flexible and skilled resource with a broad base of experience.

Working in partnership with clients, Capita’s team-based approach also ensures that work is carried out at the right level which can yield cost savings.

In common with many professional services providers Capita Asset Services recognises that Bristol is an important location, and is establishing a local company secretarial team in April 2016 which will work alongside existing Capita teams from across its divisions.

One of the key benefits of having a company secretarial team in the city will be the ability to tap into a strong and dynamic employment market, establishing a centre of excellence that is able to service clients in both the region and the country as a whole.

Jonathan Dale

Jonathan Dale, pictured, senior manager at Capita Company Secretarial Services, said: “The understanding of how a technical role such as the company secretary can be outsourced is changing, but there is still a lack of understanding of how our offering supports existing secretariats.

“We take a partnership approach to supporting our clients which can include supporting in-house teams, providing business continuity, greater depth of resource and addressing specific needs during peak times.

“The variety of experience that we are able to offer our employees helps us to attract and retain a dynamic, motivated and highly knowledgeable team which in turn contributes to the quality of resource available to support our clients.”

For information the full Outsourcing in 2020 research report was recently published in the Outsourcing Yearbook 2016 and is accessible on the NOA website http://www.noa.co.uk.

Business Pulse

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