The maturity of the local outsourcing market

As local organisations continue to consolidate and rationalise their IT infrastructures, and advanced technology solutions continue to be developed, businesses are looking at outsourcing partners to enable them to keep up with the latest technologies, cut costs, and share risks. There is an increase in the number of outsourcing providers in the local market, which means that customers have an opportunity to select from customised, flexible solutions and services to support any or all stages of the outsourcing process. Hybrid sourcing solutions such as co-sourcing and insourcing are also becoming obvious choices. 

Current challenges around IT resources, skills and budgeting 

One of the reasons that businesses outsource is because they do not have sufficient resources within the company. Expert professional skills are hard to obtain and are expensive to retain. The same challenges in terms of retaining skills face outsourcing providers. IT skills and resources are imperative to successfully service outsourcing projects. It is therefore vital for a business to select a partner with a sound track record, the appropriate Black Economic Empowerment (BEE) credentials and resources. 

On another note, the benefits of services delivered by an outsourcing provider should be immediate.  From a customer's point-of-view, it is important to manage the outsourcing provider and to ensure that the necessary resources and skills required are in place governed by stringent Service Level Agreements (SLA's). 

Feedback on the providers of choice in the local market

In South Africa, outsourcing has moved away from being an option only for large corporations to being an accepted resource for midsize companies. In turn, this has resulted in an increase in the number of outsourcing service providers in the local market.

Additionally, a successful outsourcing relationship is based on a strategic vision and plan, underpinned with mutual understanding of what is expected. Outsourcing providers should strive to understand the culture of their client's organisations. In turn, it will work to an outsourcing provider's advantage if a client has understanding of the business benefits of the outsourcing agreement and work towards achieving this. If there is a formal process of evaluating the overall benefits of the relationship, and a sound relationship is formed, an outsourcing provider could source new revenue opportunities for clients. To benefit the outsourcing relationship, a hierarchical structure within a business is required as to who will take responsibility for the success of the outsourcing agreement.

Common Business drivers

Many South African businesses are looking at various outsourcing operating or ownership models. The main business drivers for investing in these models are reduced capital expenditure and better capacity utilisation as businesses have an opportunity to focus on their core operations. An outsourcing provider has a lower cost structure, as a result of greater economies of scale that enables a reduction in operating costs. 

Additionally, in today's harsh economic climate there is pressure on businesses to continuously source avenues to cut costs. Businesses have become reluctant to take the risk associated with making an investment in IT. To make matters worse, to ensure competitive advantage, businesses are required to keep up with conditions such as continuous market fluctuations, changing government regulations as well as technologies. This result in businesses realising the benefits of sharing the risk with an outsourcing provider whilst they simultaneously gain access to world-class resources that they might not have internally. 

Obstacles to successful implementations

One of the main obstacles for an outsourcing implementation is a business not being 'ready' or 'suitable' for an outsourcing relationship. It is therefore vital that an organisation has a process for implementing and managing outsourcing relationships. Top management need to provide their support and defy any internal sceptics or cultural resistance early in the process, so that they can make plans to overcome it.