To outsource or not to outsource? That is the question. What is better? Execute our processes ourselves or entrust them, totally or partially, to external companies? What attitude do Spanish companies have towards internationalisation? What do they look for in it and who decides whether to carry it out? GrupoUno.CTC has recently published a study on outsourcing carried out with interviews with more than 300 Spanish executives from the main sectors of activity.
What do Spanish companies look for in outsourcing?
To be clear about the importance of outsourcing, we can look at the number of respondents who rate it as a strategic resource for their companies. The percentage stood at 87% of the managers consulted, which represents a rise of three points compared to the data from 2015.
Despite this importance attached to outsourcing, most use it for processes that are not part of the company’s central activity (of the ‘core business‘). In other words, companies prefer to continue to be in charge of the core part of their product or service but resort to the help of other companies for processes that are not a direct part of that ‘core’.
In the event that the internal or external cost were the same, 62% of those surveyed were willing to outsource said activity as long as:
There is an improvement in flexibility (33%)
Labor liabilities are eliminated (28%)
Increase focus on the business (11%)
Management is simplified (27%)
The motivations that companies have for choosing to outsource are also widely distributed. According to the study, the first reason is the improvement in productivity (26%), followed by the reduction of costs (23%) and getting companies to have greater flexibility in the face of changes in market demands (21%). . Being able to produce more, more efficiently, and without incurring large fixed costs seems like a winning recipe.
Does outsourcing work?
All of these advantages may seem very attractive in theory, but companies want and need to know if these promises are being realized in outsourcing. And, according to the responses to the study, Spanish companies do mostly achieve their objectives through outsourcing. 64% of those surveyed state that outsourcing “has resulted in a clear improvement in their activity”.
As we have seen, outsourcing is a strategic factor of great importance. That is why it is not surprising that the decision to carry it out comes from the upper echelons of the companies. In almost two out of three cases (62%), the company’s chief executive is the final decision-maker on outsourcing. In the remaining 28% of cases, the person who decides is the area director.
The study also investigates which sectors are more likely to use outsourcing. And it is precisely logistics that tops the list, with 51% of the companies consulted. The second place corresponds to industrial manufacturing and production activities “especially in the metropolitan areas of Madrid and Barcelona” with 30%.
Main fears when outsourcing
The results of the study show a panorama in which the majority of the companies that have taken the step have noticed an improvement in their results. However, it is also instructive to know what are the factors that make companies reluctant to undertake an outsourcing project.
In this section the results have been consistent with those of the previous edition of the study. The main concern that companies have pointed out has been the loss of control over the process (77%). In second place is concern about results (31%), since it is useless to outsource at a better cost if we are worsening our processes. Along the same lines, 29% pointed to the risk of deficiencies in execution.
Finally, 14% cite the risk of loss of knowledge and know-how. In other words, outsource and end up losing the ability to do what we were capable of doing before. This would prevent us, for example, from going the other way and re-internalizing the processes that we would have outsourced if we so decided.
When giving an answer to whether we should outsource there are no predefined recipes. Many of the companies that do so end up satisfied, improving costs, quality, service, etc. But fears and doubts are also understandable, due to the importance of putting our processes at stake -although many times they are not the processes of our ‘core business’-. Being clear about what advantages we seek with outsourcing and what risks we may face will help us make the right decision.
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