21/05/20
Economic upheaval inevitably leads to business restructuring, as companies battle to survive the downturn and prepare to capitalise on the recovery.
Perhaps unsurprisingly, we also know that an increase in business restructuring drives significant increases in business process outsourcing. This is something that we reported on in 2010 in the wake of the last great financial crash, and we were already seeing it earlier this year, in anticipation of a recession which many felt was already on its way.
Of course, at that point almost no one had anticipated either the nature or the scale of the economic convulsions that were to follow.
For many manufacturers, their in-house technical service and support function will be a strong candidate for outsourcing.
Of course there are good reasons to outsource these functions at any stage of the economic cycle. But during a recession or economic downturn, three come most strongly to the fore.
(i) Reducing costs. An in-house technical service and support function can represent a significant cost to a manufacturer. It’s not just the salary cost of the engineers of course; you also need to consider the costs of recruitment and training, a vehicle fleet, administrative support, specialist service systems, tools and more. As a fixed cost these can be a significant and unyielding drag on a manufacturing business. Once outsourced they become a variable cost that can be adjusted and managed as part of the gross margin.
(ii) Increasing flexibility. The ability to scale resourcing up and down is important during any period of economic uncertainty, and it could be argued that this has never been truer than now. With the global pandemic putting so many unknowns into play, no one knows how deep the recession will be and what form the recovery might take i.e. a quick ‘V’, a draw out ‘U’ or an unpredictable ‘W’ shape. Outsourcing technical service and support allows you to constantly adjust your resourcing throughout this uncertainty to meet fluctuations in demand, service level requirements and budgets.
(iii) Focusing resources. Outsourcing also gives manufacturers the ability to focus their in-house expertise on the things they need to do in order to survive and thrive in a recession. Technical resources often become particularly stretched during downturns as manufacturers restructure their businesses, develop new products, seek and open new markets, improve manufacturing efficiency and more. Outsourcing allows you to free your best people to focus on the task of forging a strong future for your business, safe in the knowledge that your existing products and customers are in safe hands.
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There are of course a great many drivers of a successful outsourcing project. This is a subject I will be returning to shortly in another article.
But for now I would highlight four key principles in any successful outsourcing.
The first thing to establish is which part of customer service is being considered for outsourcing? Our service wheel illustrates many of the options. It is critical that the services you are thinking of outsourcing are clearly defined, and that all workflow steps within each are identified and understood. This will help you produce an accurate cost analysis, an effective brief, and confidence that the services proposed by the outsource provider match your business outcome expectations.
Whether you decide to outsource all (total outsourcing) or some (selective or targeted outsourcing) of these functions will depend on which, and how much, of the benefits above you are trying to achieve.
The next question is whether to outsource all of the functions you have selected, or whether to retain some existing in-house capacity for delivery and/or management?
An experienced specialist provider like Qcom should already have the management and reporting systems you need to outsource whole services with compete peace of mind.
But equally there is a big trend in outsourcing towards ‘borderless collaboration’, referring to relationships where an experienced member of the core staff is retained at the host company to manage the outsourcing relationship on an ongoing basis. In many cases this might be the best place to begin the outsourcing relationship, allowing it to develop into full outsourcing as confidence grows on both sides.
Few things impact on the success or otherwise of outsourcing as much as the people strategy.
Never forget that restructuring and outsourcing have real world impacts not only on the people whose roles are being outsourced but also on those who will remain within your business.
So put your people strategy to the top of the to-do list. Map out clearly how you are going to retain the people you need, how you are going to manage the transition to a new outsource relationship, where staff might be TUPE’d across (read more here on successful outsourcing with TUPE), and where redundancies might be unavoidable. Take specialist advice and consult as early as possible to make sure you get both the legal and reputational issues in hand.
There have never been more outsource service providers than now, so finding options shouldn’t be too hard. Do bear in mind however that a high proportion of these providers are generalists; business process outsourcers who will turn their hand to just about anything they contracted to deliver.
As we have argued plenty of times before though, technical service and aftermarket support is an essential component in your overall customer proposition – and one which is far too important to be left to generalist providers. This is just as true in a recession as at any other time.
By choosing a specialist technical service and support provider like Qcom you can be confident that they will already have established processes and resources for frictionless implementation, engineering and technical expertise and high-quality customer service, as well as the reporting and review processes you will continue to need for effective management and continuous improvement.
Qcom has more than four decades of experience in this field, providing the technical, operational and service excellence required to help technology manufacturers achieve their restructuring objectives.
To discuss your own business restructuring and outsourcing requirements, please contact me at neil.anderson@qcom.co.uk or telephone +44(0)1905 827650 to arrange an initial conversation in complete confidence.
Or read how this global technology manufacturer outsourced its technical services and support to Qcom to restructure in response to changing product and market requirements.
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