The hyper-competitive nature of the global economy is linking the world’s major economies and changing the landscape of international business. This fast pace of change is compressing internal investment cycles into shorter payback periods thus creating a pressure on earnings expectation.
Earnings are products of operational efficiency while engaging people, process, and technology. Most operational activities across organizations are becoming increasingly specialized and knowledge-driven. Rapid advancement in every field makes it practically impossible for any organization to develop and sustain best-in-world expertise in every facet of its operation. Against this backdrop, organisations are moving away from the classical model to a more dynamic and contemporary internal service orientation. In this unfolding era, organisations focus their internal resources on the activities that provide them a unique competitive advantage, while engaging external service providers through outsourcing for their critical, yet non-core activities.
Outsourcing is a long-term, result-oriented business relationship with a specialized service provider. The services contracted for may encompass a single activity, a set of activities, or an entire end-to-end business process. In this arrangement, it is implied that the service provider is assuming responsibility for the people, processes and technology employed along with responsibility of ensuring quality delivery per contract.
Outsourcing is a management tool that entities use to move away from the traditional vertically integrated, self-sufficient structure to a business oriented structure where it is able to make more focused investments in the areas that provide its unique competitive advantage. With outsourcing, these entities are able to focus more of their resources – people, physical and intellectual resources, and capital; on the core parts of operations – the activities that provide its unique competitive advantage; thereby improving the company’s ability to leverage its most valuable capabilities. Another important point is the ability to free an executive’s time to focus outwardly on strategy and customers as opposed to inwardly on current operational issues.
According to Deloitte’s CFO survey, CFOs across the world are having to spend more hours on less strategic things. For many executives, dealing with day-to-day details of operational activities robs them of time that would be spent on customers, shareholders, investors, and suppliers. To leap out of this less strategic involvements, some CFO’s have considered the option of finance and accounting outsourcing because it saves valuable time for strategic activities.
Click here to access the full article.