Asia firms look to outsourcing as a way to better manage resources, costs.

Byline: Chiratas Nivatpumin

Sep. 9--Companies throughout the region have been mainly the beneficiaries of globalisation and the trend towards service outsourcing.

Whether handling service calls from Kuala Lumpur, processing cheques in Shanghai or diagnosing network traffic from Bangalore, the move by companies to outsource "non-core" activities has proven a boon for many firms throughout Asia.

Now many Asian companies themselves are looking at outsourcing as a means of better managing corporate resources and costs, according to global consultancy Accenture.

"Historically, outsourcing has evolved from IT infrastructure in the 1970s to application management and then to business processes," said Andrew Friars, an Accenture managing partner based at the firm's Melbourne office.

"But in the Asia-Pacific region, many are leapfrogging this pattern, and looking right to outsourcing everything."

Growth was being driven not just by multinationals expanding in the region, but by national companies looking to improve their competitiveness as they expand regionally and worldwide.

While companies typically looked at outsourcing as a means of cutting staff and costs, Mr Friars said the actual benefits in many cases were substantially greater.

Companies outsourcing non-core operations were able to not just reduce expenses, but also streamline their business processes as well as free up resources to pursue more critical strategic objectives.

"If you look at a company that is expanding, they want to focus on growth, not record keeping or back office operations," Mr Friars said.

"Actually, when you think about it, many companies already practice outsourcing in some form or another, whether it be a contract with an Internet service provider, bookkeeping, payroll or perhaps legal consulting."

But while many companies might turn to specialist firms to handle defined business tasks, consultancies such as Accenture say they offer broad "end-to-end" solutions rather than a "point-by-point" approach.

Leena Mayteedol, country managing director for Accenture, said one of the largest outsourcing cases in Thailand handled by the firm was for industrial giant Siam Cement, through a 50-50 joint venture called IT One.

The company now offers enterprise business application services, HR and payroll administration and call centre servicing, with staff drawn from both Accenture and Siam Cement.

IT One not only provides services for the Siam Cement group, but has since expanded to offer services to other clients, including The Aromatics Plc, the Crown Property Bureau and Thai Pineapple Canning Industry.

"Outsourcing generally starts as a question of cost-cutting. But it's actually more about managing spending and returns on investment," Mrs Leena said.

"Some companies might start with outsourcing IT functions for a single business unit. But once they realise the potential, then they look to expand the entire scope."

Mr Friars said cost-savings of 30 percent to 50 percent was typical for an outsourcing contract, although the actual benefits very much depended on the overall strategy and structure for the project.

"You need to know what you are trying to achieve," he said.

"It's a means to an end, not an end in itself. It's more like sharing a journey with someone else."

Any project needed to carefully define the services and expectations that would be required by the client from the outsourcer.

Mr Friars said concerns about "loss of control" could be managed by careful programme design that stipulated service levels and penalties for failing to meet standards.

But an even more successful approach was to adopt a broader control framework, one that tailors objectives to help align the outsourcer's objectives with those of the client.

"This could be through control mechanisms where the outsourcer has employees and management working directly at the company's site. You want to set up a shared vision and goal among the parties," he said.

Mr Friars said outsourcing was increasingly moving towards a "plug and play" approach, where standardised solutions were offered by a single outsourcer to multiple clients.

"It's really about solving a problem, about defining a strategic vision. People first thought of it as a way of moving away from non-core operations," he said.

"But now, the question is, am I the best person to do this job? Is there someone else in the marketplace who can do it better?"

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