A study published by PA Consulting Group last year found that nearly 35 per cent of UK organisations who outsource plan to ramp up this year. Overall, the outsourcing market appears to have grown 4 per cent in the past year. A large part of the outsourcing rush comes from certain industries like cloud-services. Across EMEA, the demand for cloud-based service outsourcing shot up 41 per cent in the past year.
A host of factors are contributing to this growth in outsourcing trends. According to Steven Hall, the Director of ISG UK, there is a growing acceptance for outsourcing business responsibilities to third-party organizations who take up these roles “as-a-service”. This is due to the drop in costs as well as improved agility among businesses outsourcing non-core tasks.
Cloud computing services saving businesses money
Anand Srinivasan, founder of Hubbion, a suite of free business apps and resource says cost savings due to outsourcing is especially evident in the case of enterprise technologies like AI, machine learning and robotic process automation (RPA). ‘Building an infrastructure to deploy such technologies can be prohibitively expensive. Hiring a third party service provider for these tasks not only reduces cost, but also helps improve in-house efficiency when compared to traditional processes. This is also the reason why cloud-based services are growing in popularity.’
Yet outsourcing is not always limited to job roles that are non-core or require unique skills.
UK businesses are also increasingly outsourcing core-tasks like sales and marketing to third party agencies. A HubShout survey of small businesses in the US and UK revealed that 68 per cent of them outsourced core tasks like SEO while nearly half outsourced PPC advertising.
He adds, ‘Outsourcing core activities as these are necessitated by the inherent advantage that comes with scaling up. Marketing agencies that spend several thousands of pounds spread over multiple campaigns are often able to catch on to trends and patterns much more effectively than any one business with a spend of a few hundred pounds.
‘Consequently, the ROI from such campaign can more than make up for the cost of outsourcing these marketing campaigns.’
Products can now be shipped faster
Srinivasan says the shift to third party service providers is also contributed by external market factors, such as inventory management, for example.
Online retailers who import from countries like China have typically invested in their own warehouses for stocking products. This was done primarily because the shipping time for products from China to the UK was as high as 20 days to over a month.
But now ePacket deliveries take just over a week to be shipped to countries like US, UK and twenty other countries.
‘A growing number of retailers are now outsourcing inventory management to third party suppliers.’
This also brings down the cost of demand forecasting, especially for perishable or season-sensitive products.
‘In addition to all this, the introduction of GDPR too could be impacting the outsourcing trend. GDPR regulations mandate that both the “controller” and the “processor” of the data must stay in compliance of the regulations.
‘In other words, the processor’s compliance also has a bearing on the controller (or the business owning the data). Given the high cost of violations, UK businesses are increasingly turning to outsourcing businesses in the EU for providing services. As a result, the focus of outsourcing is no longer on cost reduction, but merely on other factors like expertise and efficiency.’
Brexit could affect outsourcing
He concludes, ‘The UK outsourcing market is now in a volatile state given that the nation is expected to break away from the European Union by March next year.
‘This could mean a shift in policies and regulations that could contribute to or against outsourcing. It is worth waiting until then to see how the policies shift and how this could impact the future of outsourcing in the UK.’