Far from a quick fix or financial trick, outsourcing plays a pivotal role in optimizing business processes, expanding capabilities and building the competitive strength of an enterprise.

How can medium-sized Canadian businesses leap over their larger competitors? How about struggling enterprises seeking to move ahead of their industry leaders? Or Canadian firms looking to become leaders in the global economy?

Most organizations see investments in research and development and creating new products and services as the key to succeeding in business. But what about outsourcing? With the opportunity to outsource, businesses have the opportunity to leapfrog over the competition. Through outsourcing, companies can move from where they are today to become high-performing enterprises with superior capabilities and business processes. The motivation for outsourcing - especially for business process outsourcing - has shifted. My company has seen the industry and our clients looking more at factors like planning for business outcomes, refocusing the organization on core competencies and taking advantage of world-class specialists in performing key processes.

One global consumer brands marketer client said, "The people who think outsourcing is just about cost are wrong. If that is their only rationale for doing it, they are doing it for the wrong reasons." For forward-looking enterprises, outsourcing is much more than just a cost-cutting tool.

Experienced outsourcers are discovering that outsourcing yields high performance. Far from a quick fix or financial trick, outsourcing plays a pivotal role in optimizing business processes, expanding capabilities and building the competitive strength of an enterprise. With all of these factors in play, it is no wonder that we see outsourcing as a way to leap over the competition.

There is still room to outsource more non-core and core elements of a business. Industry estimates say that only 10 percent of what can be outsourced actually is outsourced. For Canadian firms, we can only imagine that this is lower because businesses haven't taken full advantage of global delivery opportunities for outsourcing. There are a few levers that Canadian businesses have pulled for outsourcing, but not all of them - especially the ones to drive our competitive advantage in a global economy.

Case in Point
For Best Buy's Robert Willett - who oversees the outsourcing of HR, IT operations and development - outsourcing needed to deliver on the Best Buy innovation agenda and capability build. "Wal-Mart and Dell are our two major competitors." Willett said. "Nobody can beat these people at what they do. We have to become the best at what we do. Outsourcing can get me there faster."

Through outsourcing, Best Buy discovered innovative approaches and advanced technologies that can help to transform business processes throughout America's leading consumer electronics retailer.

Canadian energy company EnCana chose to outsource its ERP system to gain new advantages in the marketplace. EnCana will continue to focus on its core business operations but have access to an experienced pool of skilled IT professionals, allowing EnCana to retain strategic control. This motivation is similar to what those other clients are asking for: time to focus on their own business and do what they do well.

Outsourcing Benefits
Outsourcing has extended its reach in motivating organizations to use it as a strategic tool to get ahead of the competition. The reasons to outsource vary from organization to industry, but the primary business motivators we have found from our extensive research include the ability to focus on core competencies; turning a fixed cost into a variable cost; access to world-class talent; freeing up resources; facilitating organizational change; increasing business capabilities; and accelerating the time to market for products and services.

Tactical reasons such as cost reduction, the freeing of investment dollars, lack of internal resources and the removal of difficult-to-manage functions are all still motivators. But leveraging the strategic levers of outsourcing can take a good business and make it great.

The success of achieving these business results rests on a few factors, including finding the right outsourcing partner. In a multi-year relationship, there is a natural tension between the needs of a business partnership and the constraints of a contract. Our research has shown that a partnership must be part of daily life of the outsourcing arrangement - built upon mutual trust, commitment and respect managed through a strong governance model.

One of the keys to leapfrogging the competition is taking the savings from outsourcing and reinvesting it strategically within the organization. According to a market research firm, companies reinvest 60 percent of cost savings attributed to outsourcing in IT or business unit projects. The savings from outsourcing can be reinvested back into the organization. The capital from outsourcing agreements should be placed back into the organization where there is the most need, such as new technologies, facilities and staff.

A challenge that is hindering Canadian firms from looking at outsourcing is concern about being perceived to be sending jobs out of the firm, particularly offshore. Although the immediate displacement of jobs does occur, the opportunity for a firm to save dollars and reinvest them in new and higher-value aspects of the business is critical. In most cases, it is better for a firm to proactively manage this displacement than to allow the market to force it to react to survive, often in ways out of its control. The Canadian landscape is littered with failed firms who have not acted quickly and proactively to stay ahead of the competition.

For instance, in using a global sourcing model and saving the organization hundreds of millions of dollars, those dollars can then be put back into the organization - into IT, new product development and, in turn, new jobs. We operate in a global economy, and for companies looking to grow overseas, working with a global delivery model for outsourcing means serving all locations in their appropriate needs, culture and time zones. It is important to note that the location for outsourcing is based on a company's requirements and can be performed down the street, in another part of Canada or offshore - whether in Southeast Asia, Latin America, China, Eastern Europe or Africa.

There are great locations, talent and operations in Canada to leverage outsourcing savings. The opportunity for most businesses is a mix of onshore and offshore as a way to manage geopolitical risk, talent availability and retention, time zone requirements, language and cultural differences. In some instances, firms might start an outsourcing project onshore for expediency and, as comfort and maturity evolve, shift to an offshore global model.

In the end, the benefits of outsourcing are many but predominantly two-fold: transforming the business while infusing new capital into the organization. In combination, these two elements can become a catalyst for taking a poorly performing organization and making it a high performer.

You get access to resources and talent that could have been costly to your organization to create or fund. On the other hand, the analogy for outsourcing would be taking money from a pair of pants that has a hole in the pocket and putting the money in the bank. Outsourcing is the opportunity to keep from constantly having to mend your organization.   VTR_US

Tony Gaffney is the executive director of Accenture's outsourcing business in Canada. He is also the managing director for Accenture's Toronto-based operations, overseeing all of its businesses. Contact This e-mail address is being protected from spam bots, you need JavaScript enabled to view it for more information.