25 October 2014

Cash Management

Michael Plante - Cash Management Solutions

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Economies of Intelligence - The New Motive for Outsourcing

11 July 2014  |  3092 views  |  0

Over the past ten years the role of outsourcing has changed dramatically. While outsourcing was once only an option for low-skilled or process-oriented roles, organisations are now beginning to understand the benefits of knowledge-intensive outsourcing to specialists.

The Changing Role of Outsourcing

While in an ideal world organisations may argue that they would prefer to keep all skills in-house, it is clear that outsourcing is a vital part of the global business landscape. Traditionally, for corporate decision makers, the argument for outsourcing has been focussed on one thing: saving money. However, in recent years the way that organisations outsource has dramatically changed and they realise that there is much more to gain than cost savings.

When you think about outsourcing what comes to mind?

Manufacturing? Customer service departments? IT? Intelligence?

It probably wasn’t the final option, intelligence, but the outsourcing of highly-skilled labour is very real and growing at an astonishing pace. While this has always been happening to an extent with consultants and highly-skilled contractors, the logic behind ‘outsourcing intelligence’ being a viable scenario for an organisation has gained significant support.

Gains from Outsourced Intelligence

A report published by the McKinsey Global Institute in April looks at how “global flows” of finance, labour and data have connected the world economy over the past ten years. Their findings support and give evidence to the changing role of outsourcing.

McKinsey’s research found that the trade of knowledge-intensive goods, which require significant investment in development or highly-skilled labour, has been growing at 130% the rate of labour-intensive goods – those you would traditionally expect to be outsourced. This shows organisations’ approach to outsourcing no longer focusses solely on low-skilled roles. Furthermore, the report credits the digital revolution for much of this as it found “digitalisation is transforming and enriching all flows”. Digitalisation, spearheaded by the Internet, has helped remove any barriers of uncertainty that may have existed – such as issues regarding the transfer and security of data as well as the ability to work remotely.

All of this begs the question: what are the benefits of outsourcing such knowledge-intensive roles?

Cost Savings - The obvious factor remains: money. Firstly, the initial outlay associated with developing a business unit in-house is avoided. However, greater savings can be generated over time through gains in efficiency. A company that specialises in a knowledge-intensive area can generate cost reductions by operating at a higher level of productivity.

Staff Productivity - The impact on internal productivity cannot be underestimated as employees are able to focus on core-business functions without distraction.

Partnership Benefits - Collaborative benefits that stem from having access to such outsourced intelligence can be realised. These include profiting from economies of experience, knowledge, specialisation and scale, and, if outsourcing is implemented effectively, a new element of competitive advantage.

TagsInnovationTransaction banking

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Michael Plante

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Cash Management Solutions

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