While many overseas companies are hesitant to outsource work, the majority of New Zealand businesses are happy to embrace the concept, according to new research from the Grant Thornton International Business Report (IBR).
Even though overseas businesses are aware of the cost savings and process efficiencies outsourcing business processes can provide, many are worried about losing control of a key process.
Paul Kane, Partner, Privately Held Business at Grant Thornton New Zealand, said that while the IBR survey suggests that 60% of businesses around the world don’t outsource or have any immediate plans to outsource a business process, many New Zealand businesses feel differently.
“In New Zealand, over half of our businesses (52%) either outsource or plan to outsource work, ranking us 9th out of the 45 economies surveyed.
“A key ingredient in this figure is the size of our businesses. We are predominantly a country of small to medium sized businesses and for many it’s just too expensive or totally impractical to try and carry out all business activities inside the company.
“While this does give away an element of control, and there is a section of New Zealand business that is reluctant to outsource for this very reason, it does mean that businesses can tap into expertise on an ‘as needs’ basis. It means you can get top quality advice which is not a fixed overhead,” he said.
“We may just see this as logical, but the same can’t be said for the rest of the world. Overseas there is a popular misconception that outsourcing a process means a business loses control, whereas in fact, outsourcing can actually help senior leaders at dynamic companies take a step back and gain a clearer picture of how the business is performing against its strategy.
“Outsourcing can both improve efficiencies, as well as reduce cost and we have noticed that in the last six months there has been quite a shift to outsourcing amongst middle-sized companies in New Zealand where they have taken out the in-house accounting section and replaced it with external managers under our control.
“It can result in us putting in our staff, or mean that we employ and control their staff. The onus is then on us to control and perform in an area that we understand. There are some businesses who do not understand what their accounting section is both meant to do and actually capable of doing,” he said.
Of the New Zealand businesses surveyed:
- 77% outsource IT
- 73% outsource tax
- 62% outsource accounting
- 35% outsource financial services
- 35% outsource HR
Kane said that one aspect of the report that was interesting was the reluctance of overseas firms to have their business processes carried out in another country.
“Unfortunately we have no data on how New Zealand firms feel on having the likes of their accounting work carried out in specific places, such as India.
“My gut feeling is that we would be far more open about this than other overseas companies. There are accounting firms in New Zealand and the United States’ where much of the accounting work is actually carried out in India,” he said.