Strategy is about letting go – but what should a company let go of?
The classic idea that “it’s not worth doing everything yourself” is on many people’s minds during a recession, but especially when the economy takes off. Usually, a company will outsource what doesn’t add value and do in-house what does. But the principles of outsourcing are changing, argues Sofigate’s Mikko Saari.
A company’s IT infrastructure is a bit like cleaning your home: a necessity, but not a strategic one. Very few homes shine simply because they are well vacuumed.
Many homeowners have therefore opted for professionals to clean their homes. At the same time, they have turned their attention to more value-added activities, such as improving their living comfort, which can be compared to developing the core business of a company.
Many companies, on the other hand, are still holding on tightly to their IT infrastructure, preferring to manage it themselves.
Outsourcing company functions is therefore often a difficult and very case-specific choice. But how should strategic choices be made and what are the evaluation and decision-making processes involved?
A classical or modern approach?
The classical approach emphasises the identification of the core activities of the company and their development internally. This approach ensures that the core functions of the company remain firmly under its own control. At the same time, it allows the organisation to focus its resources on what really adds value and differentiates it from its competitors.
The modern approach uses the latest technologies, data analytics and artificial intelligence to support decision-making. AI and data analytics allow companies to accurately analyse their operations and identify areas that are not adding enough value.
1. Clarifying the strategy
Model the company’s “strategy to revenue” main process and related core activities on a single capability map (capability = people, processes, tools, data) and use data analytics to inform decisions. With analytics, you can accurately assess which activities are really adding value and which are not.
2. Data-driven evaluation
Use data analytics and AI to evaluate all aspects of your business. This will help you identify efficiency gaps and potential outsourcing targets. Data-driven decision making reduces the risk of subjective judgments and increases the accuracy of decisions.
3. Agility and continuous improvement
Adopt agile and lean methodologies that support continuous improvement and agile decision making. This will enable rapid adaptation to changing market conditions and ensure that strategic choices and decisions are made based on up-to-date information.
The eliminations have been made, now what?
Once the strategic choices have been made and select functions have been let go of, success is determined by how the remaining core and eliminated functions are most effectively implemented.
The world of outsourcing has changed considerably in recent years. Outsourcing is no longer just about cutting costs or outsourcing non-strategic activities. Today, outsourcing is a strategic choice that can bring significant competitive advantage when done right.
1. The importance of partnerships
In the past, outsourcing may have been seen as simply buying a service. Today, it is more of a partnership, with both parties working together towards common goals. Outsourcing companies are not just service providers, but strategic partners, bringing with them specific expertise and a wide range of experience.
2. The role of technology and innovation
Modern outsourcing solutions make use of the latest technologies such as artificial intelligence, machine learning and automation. This enables them to streamline processes and improve quality, adding value to the business and increasing competitiveness. Outsourcing partners that continuously invest in technology can offer their clients state-of-the-art solutions, not only to enhance support functions, but also to provide intelligent solutions directly for core operations.
3. Flexibility and scalability
Changes in the business environment can be rapid and unpredictable, making flexibility vital. It is therefore advisable to use outsourcing partners as part of your own organic growth in any business where staff growth or turnover is high. Service packages that can be adapted to the company’s needs also ensure that the company can increase or decrease the number of outsourced activities according to business needs.
4. Data security and regulation
Outsourcing companies must ensure that they meet stringent data security and regulatory requirements. This increases trust and ensures that the company’s valuable data is safe.
5. Combining cost-effectiveness and value
While cost efficiency remains an important factor in outsourcing, today’s focus is also on how outsourcing can add value. Outsourcing companies can bring best practices, expertise and innovation to help client companies succeed.
Outsourcing is a strategic choice
When considering strategic outsourcing decisions, a company needs to assess these changed factors and select partners that can deliver the best value. This may mean outsourcing IT infrastructure – but many other functions that are not core to the business but critical to its operations may also end up being outsourced.
Outsourcing has emerged as a strategic choice to support long-term growth and competitiveness. By choosing the right partners and using modern technology, companies can achieve significant benefits and differentiate themselves from their competitors. This combination of the best of the classic and modern approaches can provide a clear and effective path to success, with outsourcing as a key element.
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Author
Mikko Saari leads Sofigate’s Business Technology Studio and Operator business, which combines end-to-end IT services, business technology management services, and world-leading platform solutions for mid-sized growth companies.
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