The main trend on the outsourcing market is automation of all business processes – ERP systems, digital payroll and other staff document management, employees’ personal accounts and much more. But automation has always been (and will be) relevant, while certain changes in the work of outsourcing providers have only taken shape this year. Read the article below to find out which trends are affecting the outsourcing market the most.
Local outsourcing of business processes
Many representative offices of global companies, left without support from their headquarters, were compelled to alter their processes and workflows in Russia – to shift from foreign software to locally developed solutions, to build their own supply chains, or to develop new document management systems.
As a rule, such changes are difficult to perform in-house, as the team is unlikely to have the necessary experience or even the time to handle this change. At the same time, it is important for a local representative office to maintain high standards and the status of an international company, as many companies consider returning to the Russian market.
Implications for the outsourcing market:
- There will be more customers seeking top quality services. Over the past six months, UCMS Group has seen a 300% surge in requests from large companies that previously used international outsourcing providers or SSCs.
- The change can possibly give a boost to Russian software development, to compensate for the loss of global systems such as Oracle and SAP. Accordingly, more companies will require services to shift their workflows to Russian systems.
Growth of Russian business
This should open up growth opportunities for small and medium-sized businesses in Russia. Despite the obvious downside for the local manufacturing and import of products, the departure of foreign brands has freed up the market and given a head start to Russian analogues. In addition, executives previously employed by international corporations will join Russian teams.
Implications for the outsourcing market:
- More new customers will appear, as rapid growth will require prompt and high-quality adjustment and scaling of business processes at companies.
- The level of trust in outsourcing will increase, largely due to senior executives with experience in international companies and their habit of ordering services from professionals.
Development of Eastern businesses
For the same reasons that Russian companies will grow, there is a high chance that Chinese and other Asian and Eastern companies will also expand their businesses. They will have to figure out rules and specifics of Russian business operations and comply with Russian law. The easiest way would be to use services of a local outsourcer.
Implications for the outsourcing market:
- Outsourcers will need to learn the specifics of doing business in oriental countries and fit their requirements, consider time zones and cultural nuances.
Toughening regulatory control of outsourcers
Currently, outsourcing companies are not subject to mandatory regulation, unlike outsourcing activity, for example. But because the outsourcing market will potentially continue to grow, there may be higher interest on behalf of the Central Bank, the Federal Security Service, the Federal Service for Oversight of Consumer Protection and Welfare and other regulatory bodies.
Implications for the outsourcing market:
- Outsources may be required to disclose information about their clients’ business operations. To maintain high trust in outsourcing services, outsources will have to rethink their own operations and convince their clients that client data is safe.
Competition with SSCs and higher outsourcing rates
Currently, many shared services centers (SSC) that originally worked for only one corporation are more actively entering the open market and offering their services. They often may set lower rates. Unfortunately, this kind of low-balling may have a negative effect on the outsourcing market in general because clients will pick price over quality.
Meanwhile, independent outsourcing companies will only keep boosting their rates as infrastructure costs rise – for example, expenses on software, computers and servers that can ensure fast and secure data processing. Wages of highly skilled professionals will also grow.
Implications for the outsourcing market:
- It will be harder to explain to clients why our rates are higher than those offered by shared services center.
- Higher rates will turn away only emerging businesses.
Readiness for constant change
During the pandemic, potential scenarios became apparent rather soon but in the current situation, anything can happen, making it impossible for companies to make long-term plans. In the past, it could take about a year between a lead coming in and a project launched because in large corporations, decision-making is very slow. Today clients want to see a quote within an hour and are ready to start within a month.
Current clients also go through changes and are interested in new services. Some completely reinvent their business processes and cut their staff by two-thirds while others scale up and hire new people. There are also companies that simply wind down.
At the same time, almost every day we hear about new concessions and prohibitions aimed at stabilizing the economy. Human resources and accounting staff are having a hard time following changes in legislation.
Implications for the outsourcing market:
- It will be necessary to juggle resources, adapt and make decisions even faster.
- Outsourcing companies will have to be flexible as never before to be able to maintain high standards and stay ahead of the curve during the times of instability.
The main outsourcing trend is to give companies exactly what they need at the moment, not one month from today. Businesses need help in all processes, especially such sensitive ones as personnel document flow and accounting and tax reporting. The way we show ourselves right now will determine our future and build trust in the outsourcing market.
By Ekaterina Menshikova, Sales Director, UCMS Group