Outsourcing gains ground
Feb 09 2009 17:23
Simon Dingle
Johannesburg - Outsourcing is becoming increasingly attractive to companies looking for improved operational efficiency.
As the economic steamroller continues to make its way through the corporate world, many companies are being forced to do more with less. This has led many to seek outsourced providers for everything from IT management to call centre operations.
A report released by the SA-based BMI-TechKnowledge Group shows that outsourcing is the fastest-growing component of the South African IT market.
Robert Sussman, joint CEO of the Intergr8 Group, says that his business is seeing a growing demand for services it offers in call-centre and IT nerve-centre outsourcing.
"Everyone is looking at outsourcing again and realising the benefits offered by improving efficiencies with a partner.
"This can be a good move for businesses that successfully adjust their processes and perhaps start with a shared-sourcing model and over time migrate to outsourcing," says Sussman.
"Six months ago, we were battling to find skills; now, the influx of CVs is astronomical," he adds.
As companies look to outsource and let go of internal talent, so the purveyors of shared and outsourced services are provided with laid-off skills.
Not only is the pipeline looking good, but the skills shortage is being solved, creating a highly favourable environment for this nature of business.
Prejudice vs benefits
Says Grant Bodley, general manager for Dimension Data Middle East and Africa: "In the current market we see many businesses cutting capital expenditure and sweating old assets.
"This leads to an increase in operation costs because of the break-fix involved in keeping systems running, and results in downtime too.
"Outsourcing can solve problems for companies, but is still seen by some as something that doesn't necessarily provide cost savings. Some even worry that it will halt innovation and fail to meet business metrics, and believe that their business is able to do as well as or better than an outsourcing provider.
"But there are clear benefits for outsourcing that must be considered."
Bodley says outsourcing is predicted to continue to account for the largest portion of the total IT services market, reflecting the fastest growth rate over the next five years with a compound annual growth rate of 7.7%.
Outsourcing now accounts for about 44% of the total IT services market in South Africa, he says, adding that now is not the time to be cutting budgets.
"IT investments often deliver more value to a company's top and bottom lines - by creating efficiencies and increasing revenues - than any savings gained from traditional IT cost-cutting."
He says that the small- and medium-sized enterprise (SME) sector is more active in terms of seeking outsourcing partners, while large businesses still prefer the in-house approach, although this is starting to change. Sasol, for one, is out on tender for an outsourcing partner.
- Fin24.com
