A recent Canberra Times article, “Outsourcing failures expose weaknesses in both government and business”, has some valuable lessons for risk managers, CFOs and procurement executives.
The Business Process Outsourcing (BPO) industry was predicted to produce revenue of $31.4 billion in 2016/17, according to market research firm IBISWorld. The BPO industry provides a variety of back- and front-office services to business, such as call centre operations, IT services, debt collection and recruitment. Additionally, there are consultants who handle many other functions, including claims administration and self-insurance services, public relations, lobbying, accounting, legal services and research.
While many companies can perform these tasks with their internal headcount, specialist consultants can usually do so more proficiently and at a lower cost due to their greater experience, expertise and economies of scale. In practice, outsourcing should enable firms to focus on the higher-value activities they do best.
Clear objectives lead to stronger results
A common complaint against outsourcing is that the use of contractors causes agencies “to run down their in-house expertise and technical resources”, contends the Canberra Times article. I’m in full agreement. I also agree that many commercial consultants seem more concerned with profit than providing valuable service. It’s been my experience over a 25-year corporate career that some large international companies have been guiltier of this than domestic firms.
Over the past two decades, using external consultants has been an efficient model when there are clear objectives that are easily monitored, as the Canberra Times noted. Contracting-out also adds significant value when there is a competitive market of consultants pitching for a firm’s business. Outsourcing produces results when it’s used for more complex services, and it works best when a consultancy is never allowed to become complacent or manipulative.
Lessons for commercial sector outsourcing
While the Canberra Times article focusses mostly on government outsourcing models, many of its arguments and observations could be extended to commercial contracts awarded by private enterprises. The challenges and success methodologies are the same whether a consultant is providing services to the public or private sector.
The HIMS Group provides world-class innovative workforce solutions to government and private clients. Our team thrives on helping organisations better navigate their approach to business strategy through their existing headcount. In addition, we recognise the value of building long-term partnerships underpinned by honesty, transparency and trust. We also take pride in delivering our clients “no surprises”.
It’s my experience that if consultants don’t pursue a similar long-term approach, outsourced services have a short lifespan and are quickly returned to in-house functions. The right approach must be set in stone from the time the service level agreements (SLAs) are signed. The SLAs create checks and balances and should be outcomes focused, not merely performance measures that are linked to compliance.
The clear-cut reasons to use outsourcing are financial predictability, improved productivity, greater experience, better governance and the opportunity for continuous improvement. To ensure consulting success, these five benefits must be embedded in the performance measures.
Finally, I believe preference should be given to Australian owned and operated suppliers that employ locally and have lower overheads, as this usually leads to more competitive pricing. The barrier for local companies working with public sector customers can be the contracts developed by state and federal governments, which tend to preclude their participation due to the cost of compliance.
On behalf of the staff and management team of the HIMS Group we wish to thank the industry and regulators for their support since we launched the business in 2016.
Over the past year, the HIMS Group has partnered with a range of employers and worked closely with regulators in five jurisdictions. We have recently opened our Melbourne office, headed by Branch Manager Graeme Munro, and we are looking at expansion into two or more states over the next year.
To find out more about the HIMS Group, call us on 02 8378 2127 or email team@himsgroup.com.au
