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Outsourcing and the common man
The concept of a two-income family in the 21st century is a very common phenomenon in Europe, North America and the developed nations of the Asia-Pacific. The developed world has seen property values increase at unprecedented rates; many families simply cannot afford to have one partner stay at home to take care of the home and family. Unless of course they are well into their mortgage, but for the younger aspirational middle classes it is not an option.
Double income households bring their own unique set of pressures. Who for example does the housework, the gardening, childcare, walking the dog, doing the laundry, preparing the evening meals? While mums and dads have turned themselves into slaves to their mortgages, some body has to do the household chores! Many households are turning to outsourcing. The trend of outsourcing in the area of personal services is growing dramatically. According to the Australian Bureau of Statistics in 2006-07 the average Australian household will spend over $14,000 to get others to do things that they just do not have time to do any more. By the way, that is about the same amount as the average annual mortgage. That is an amazing number, when you consider that one has to earn about $28,000 in pre tax income to pay for it all.
The average annual salary in Australia is about $52,000, which means some people are spending a considerable proportion of that household income just to do chores. The interesting thing here is that the wealthiest 20% of households in Australia account for 59% of total household net worth, with average net worth of $1.4 million per household. Therefore, although some families are getting richer in net worth terms, they are foregoing lifestyle in return for some payoff in the future. At the end of the rat race you are still a rat, and you know what happens when rats are stressed?
It is the same for businesses. There is a collection of things that companies must do that are not core to the business they are in. Just as a family defines its self by the limited quality time that they have together, so to a company needs ‘quality’ time to consider how it wants to be defined in a strategic sense. If a family does not want to increase its stress levels by spending their scarce time doing cores, neither does a company want to waste its valuable time doing non-core processes that add no real value to what they do.
How many times have you waited around for another part of the organization to deliver some innocuous process to you and being told that ‘we have no band width’, ‘we are backed up’, ‘we are going as fast as we can’, ‘we have other priorities’ etc and the list goes on. The result is that you cannot do your job because you are beaten by the system. Magnify this by all of the employees in your company and multiply it again by all of the processes and you can start to understand where the word bureaucracy (excessive red tape) comes from! The last thing you need is another layer of management; oops, I meant overhead, to administer it all.
Like the professional dog walker, or gardener, there are people who are better qualified to take these problems off your hands. They can make your life a whole lot easier, less stressful and a lot less expensive for you. After all they are specialists in their field. This is one of the core values of outsourcing.
The other value of outsourcing of course is reducing costs. How much cost reduction you can get often depends on where you go for services but any outsourcer should be able to reduce your costs by at least 10% because the job they do is there core competency and focus. By going offshore to destinations with lower cost labor such as the Philippines, India, or Malaysia, cost reductions of 30% or more can be found. Interestingly enough, the overseas operations because of the experience, scale, and resources often do the job far better and with less oversight than doing the work internally or outsourcing domestically. If the outsourcing process is done right and processes are reviewed and improved before outsourcing, efficiencies can be unlocked that can lead to additional cost reductions and improved customer service.
While costs do matter, improving quality and freeing up a business to be more efficient and able to focus more on its core activities are some of the most important outcomes of outsourcing. That is when the other benefits of outsourcing come into play, including revenue growth and business expansion.
-- Martin Conboy
(Martin Conboy is the Co-founder and CEO of FooBooOnLine.com. He has extensive knowledge of Asia Pacific market trends and he is one of the most quoted commentators in the call center and outsourcing space in the in the Asia Pacific.)
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