Keep your eye on your core business
BUSINESS| July 19, 2012, 11:16 a.m.
Outsourcing and managed services have been business buzzwords for over a decade, with the benefits being touted by experts across numerous industries as the answer to cutting costs for business functions ranging from information technology to accounting, marketing and human resources. However, according to Anton van Heerden, General Manager at Altech ISIS, many South African companies are still reluctant to outsource certain elements of their business due to a misconception that these must remain in-house in order for the business to function effectively.
He explains that this false impression is the result of a lack of understanding between the core business of a company and the core functionality that enables the business. “Every company has a single focus to all of its business activities: providing the products or services that form the foundation of the business. Core business operations are all of the activities that yield an income for an enterprise, and support operations – which are the core functionalities – are ancillary activities that permit or facilitate the core business. For example, a bank’s core business is banking. While a call centre is essential to the functioning of a bank, it is not the core of the bank’s business. It is a core functionality.”
It is precisely because core functionalities are essential to the running of the business that many companies feel the need to manage them rather than outsourcing them – if a core function of the business fails, the whole operation stands still. However, allowing a trusted third-party partner, such as Altech ISIS, to manage these will ultimately result in improved performance and reduced costs.
There is more to managed services than merely handing an element of the business over to an outsourced service provider, van Heerden says. “The ever-changing technology and business landscapes are throwing up challenge after challenge to companies. It is neither practical, nor possible, to be a jack of all trades. Outsourcing lets a business focus on its core competencies while another company focuses on theirs. The return on investment is so much greater when you outsource to a company that specialises in the areas you need, effectively turning a cost centre into a profit centre.”
Gone are the days when businesses could afford to carry any additional costs. In economic times like these, it is vital that every company be as efficient as possible. This is the reason that the trend of outsourcing core functionalities such as billing has emerged in the US and Europe, allowing companies to achieve greater economies of scale and empowering them to better achieve their business goals.
"Instead of just the knowledge of one person, you benefit from the collective experience of a team of professionals. In addition, because professional outsourced providers work with multiple clients and need to keep up on industry best practices, they typically know what is right for a business and what is not. This kind of knowledge and experience dramatically reduces the risk of implementing a costly or wrong decision. By allowing a specialist to manage the core functions of a business, a company can focus on its core competencies, all the while sharing and managing any risks. Real-world examples prove the outcomes of this approach,” van Heerden concludes.
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