If the pandemic has taught us anything, it’s that those businesses that are agile, flexible and scalable are far more likely to survive than those that aren’t. ‘Business as usual’ has become a moving goalpost, ever fluctuating in these unprecedented times. The rigid processes and blinkered thinking of the past is slowly making way for a new way of doing things, and only those who can keep up will keep their heads above water. The great news is that those who learn how to go with the new flow have the potential to not only survive but thrive.
These days businesses are all about faster, better, cheaper – without sacrificing quality. As companies race against each other to provide superior services, they need to be agile enough to adapt to the constantly changing needs and demands of today’s world. One of the ways to achieve this is through a move towards functional outsourcing. To understand why, let’s dig a little into what functional outsourcing is and why it has become such a buzzword recently.
What is functional outsourcing?
Most of us are familiar with the concept of outsourcing, something that many large companies have been doing since the ʼ80s and ʼ90s. Although there are many types of outsourcing, the broad definition relates to when a company uses external resources, contractors or third-party providers to do its work.
Functional outsourcing, also known as Business Process Outsourcing (BPO), is a specific form of outsourcing. What differentiates functional outsourcing, though, is that it entails outsourcing an essential business task that does not form part of the organisation’s core business. Examples of this include a telecoms provider outsourcing its sales function or a food manufacturer outsourcing its packaging function.
The advantages of functional outsourcing
In its 2020 Global Outsourcing Survey, Deloitte found that the main reason cited by companies for using functional outsourcing is cost saving, followed by flexibility, speed to market, access to tools and processes and agility. Let’s take a closer look at why it makes sense to outsource your non-core processes.
Core focus
If you have a manufacturing company, (or any of the above examples) it’s a given that you are producing a great product. But this doesn’t necessarily mean that you are good at the entire process within the life cycle of your product, whether we are talking about a simple welcome at the door, or sorting, wrapping, packaging, and warehousing. Sales is also a highly specialised function that suits outsourcing. Finally, most businesses are not experts in South Africa’s labour dynamics in the same way that a business like FunxionO is.
Cost cutting
Third-party suppliers often offer competitive pricing and at a premium service standard. Because businesses only pay for what they use, costs are managed. In addition, outsourcing of non-core activities removes the responsibility of staff recruitment, maintenance and discipline (including management of labour issues and dispute) to a third-party. Functional outsourcing also allows the flexibility to reduce or discontinue certain services in an adverse economic environment, without the cost of retrenchments.
Best practice
External service providers come with specialist knowledge, expertise and experience relating to their field and are responsible for any licences or accreditation that the work requires. This is particularly critical when it comes to SHEQ (safety, health, environment and quality) regulations and risk mitigation.
Specialists also stay abreast of industry changes and trends, learn new techniques and constantly develop their skills. Functional outsourcing partners, such as FunxionO, invest in the required technology or systems, which means you don’t have to and in-house industrial engineers and process optimisation experts also unlock cost efficiency and optimisation that ultimately benefit client businesses and drive competitiveness.
Stability
Outsourcing builds a level of consistency in your business. Employee turnover is painful – there is never a good time for someone to resign. Not only do you have to find a suitable replacement in a short amount of time, but all the time and money you spent on developing the staff member leaves too. Outsourcing creates consistency in the business; staff turnover becomes someone else’s concern, and your operations continue smoothly without interruption.
The broader benefits of functional outsourcing in South Africa
It’s clear that there are many benefits to outsourcing, yet there is a perception that these only apply to businesses; that outsourcing doesn’t create jobs and even leads to job losses. But according to a publication by Deloitte entitled Outsourcing is good for Job Creation in South Africa, the short- and long-run labour market repercussions of outsourcing contradict these negative perceptions. In fact, South Africa has identified functional outsourcing as a key enabler of growth and job creation.
With a growing English-speaking population, a time zone that overlaps with most regions, low costs and availability of large outsourcing service providers and buyers, South Africa is emerging as an outsourcing destination of choice. With the help of the government and outsourcing service providers, the industry can drive job creation by professionalising services across functions and industries.
As functional outsourcing experts, we at FunxionO are committed to providing unique process outsourcing solutions that are rooted in integration, partnership and risk-sharing, enabling our clients to accelerate productivity, ensure business continuity and reduce costs. We follow an operational approach that’s not based on a labour-intensive model, but rather on a measurable-productivity model. Together with our clients, FunxionO creates solutions to optimise productivity levels and efficiencies.
