Dear Readers,

Outsourcing has not always been regarded warmly by businesses or indeed by their employees. Often associated with cost-cutting and redundancies, outsourcing has not benefited from being mistakenly conflated with offshoring, whereby processes are shifted to low-cost markets overseas.

This negative image was illustrated by a survey published by the National Outsourcing Association (NOA), which­­ found that 22 per cent of people cited outsourcing as a profession they dislike.

In the last five to ten years, outsourcing has gone from being a dirty word to a common tool used by most mid-to-large-sized businesses.

However, the survey’s respondents also indicated that their opinion of outsourcing would improve with sufficient proof of the sector’s contribution to UK jobs and the national economy.

Understanding outsourcing’s importance

Recent figures have illustrated the value of outsourcing by both these measures. According to the Business Services Association, the outsourced and business services sector accounts for 9.3 per cent of gross value added to the economy and employs 3.3 million people in the UK.

Growth is expected to continue across a wide variety of activities. For example, Deloitte’s 2014 Global Outsourcing and Insourcing Survey found that 26 per cent of respondents were planning to outsource elements of their IT function in the future, with 53 per cent already doing so.

As outsourcing has continued to become more prevalent,

“In the last five to ten years, outsourcing has gone from being a dirty word to a common tool used by most mid-to-large-sized businesses,” says Punit Bhatia, head of business process outsourcing advisory at Deloitte.

Initiatives such as the NOA’s Outsourcing Works campaign, which aims to present a more accurate picture of the benefits of outsourcing, may have helped to raise the profile of outsourcing. At the same time, the reasons for using outsourcing have begun to change, with some companies refining their views on the value that outsourcing brings to their businesses.

Not just a cost-cutting exercise

In the past, outsourcing was regarded first and foremost as a cost-cutting exercise, but for many companies, cost reduction is no longer the main reason for taking this approach. “While saving cost is still important, it has gone from being the primary driver to becoming a by-product of an outsourcing programme,” says Mr Bhatia.

This is backed up by research published by Grant Thornton last year. Improving efficiencies was cited as a driver for outsourcing back-office services by 57 per cent of business leaders globally compared with 55 per cent who cited cost reductions. Other common drivers included business continuity, better access to expertise and allowing staff to focus on core strategy.

While connotations of job losses have not helped the sector’s image, it is also evident that outsourcing can bring talent-related benefits. In practice, recruiting, training and employing in-house staff for every activity may not be the best solution for every company.

Accessing talent

The question is not always whether you can attract it, it’s more whether the business wants to invest in talent in an area that is not core to their business,” says Chris Stancombe, chief executive, business process outsourcing at Capgemini.

Mr Stancombe says companies choosing to outsource certain activities can access a broader pool of flexible talent across the globe. Employees working for the providers can also benefit. “For employees who join an outsourcing provider, they have the opportunity to broaden their experience in different service areas and across different sectors,” he says. “This amounts to greater development in their professional capabilities and improved career prospects.”.