The recent trend for localised outsourcing includes hiring local employees which eliminate language barriers and cultural difference.
You don’t have to go to the big city to find a bargain, a better product, better service and overall cheaper package can sometimes be found on your doorstep, localised outsourcing can provide all of these advantages and is coming to be seen as an increasingly attractive option.
With businesses facing rising costs with uncertain global economic stability, localised outsourcing has become a new cost saving measure that is seeing increased up-take. The UK government has moved to publicise and invest in SMEs, with the promotion of SMEs as suppliers being a key part of the government’s strategy, in seeking to move the economy out from recession.
Many popular offshore outsourcing destinations are becoming increasingly expensive, even outsourcing within the same country can present logistical difficulties. Local outsourcing can present efficiencies and levels of accessibility that even in a digital are simply not available elsewhere.
Often multi-national or global companies will seek to seek efficiencies and employ local services around different sites. A hybrid approach is becoming increasingly popular, with big business adopting the advantages of both local and distant outsourcing.
Adrian Guttridge, Head of Business Process Outsourcing, EMEA, HP Enterprise Services, said “When it comes to locaslised outsourcing, HP certainly takes the middle road and implements the hybrid model of onshoring v offshoring.” Guttridge detailed that: “Individual customers may have specific reasons for wishing to keep certain services onshore – such as data-protection and security – but it is more than likely that for other services, location choices will depend largely on the vendor’s judgment that conditions are suitable.”
Localised outsourcing can sometimes be difficult to employ effectively. Popular areas for outsourced overseas services can often include countries with developing economies. Political pressures and conflicts can be a risk of localised outsourcing. “Social and political unrest, particularly in many developing markets, has demonstrated the geopolitical risk of locating business services abroad.” said Guttridge.
Global business can employ localised services around sites in multiple geographic locations. While this can allow for increased efficiency, lowering procurement costs, and taking advantage of local resources, such as; educated workforce, low cost labour and rapid transport times, the employment of localised services can give rise to cultural differences. These can sometimes be an obstacle if not effectively planned for. The director at Charterhouse, David Fincham, said: "Fundamental dissimilarities in culture that exist from one nation to another. These differences can have a significant bearing on how procurement does business and builds relationships with suppliers."
David Fincham, identified that: "Centralised procurement can arguably lead to a more consistent and compelling message while leveraging economies of scale, however, these benefits hinge on the relationship between central decision-makers and local markets."
Difficulties regarding cultural differences can be avoided through forward planning and an understanding of cultural backgrounds. Having a project manager or workers within the team who have a link to the cultural environment in proximity to an outsourcing project can help to ease transition and create strong links, which in turn increases the efficiency of localised outsourcing.
"Some multinationals’ quest for a smooth, singular global model is inadvertently creating kinks in their own supply chain. Yet, it doesn’t have to be this way. If only local managers were involved and engaged from the beginning, global category managers would find that they could avoid weeks of ineffectual negotiations with their colleagues and agency suppliers," said Fincham.
Global business can employ localised services around sites in multiple geographic locations. While this can allow for increased efficiency, lowering procurement costs, and taking advantage of local resources, such as; educated workforce, low cost labour and rapid transport times, the employment of localised services can give rise to cultural differences. These can sometimes be an obstacle if not effectively planned for. The director at Charterhouse, David Fincham, said: "Fundamental dissimilarities in culture that exist from one nation to another. These differences can have a significant bearing on how procurement does business and builds relationships with suppliers."
Adrian Guttridge described how HP had faced difficulties in using localised businesses, due to the complexity of the UK government procurement process, which can be highly complex to up and coming organisations. The very nature of the government procurement service, shows recognition of the value of localised services and outsourcing opportunities to UK investment.
Big businesses such as HP have moved to take advantage of localised outsourcing within the UK, with Adrian Guttridge detailing how: “HP are set on adding a further 150 SMEs to its supply chain and increasing spend with them by 50 percent by the end of next year. It is also appointing an SME Champion who will bring even closer alignment between the goals of HP and the needs of that local community, a task which spans providing better advice and support, improving our procurement process”.
Localised outsourcing can present difficulties and has clear limitations, however the employment of a hybrid model allows businesses to take full advantage of the efficiencies on offer. The benefits of localised outsourcing to businesses are being recognised by governments, with the UK government moving to enhance the procurement process. With planning, users can avoid potential risk and gain the likes of cost savings, overall efficiency, detailed oversight, with the rapid delivery of services.