Outsourcing – It’s Not Just For Cost Reduction Anymore

November 9, 2011

I’ve noticed lately that almost every article, email newsletter and seminar aimed at the asset management industry focuses on outsourcing.   Outsourcing has been a topic of interest for many years, but what is particularly interesting in the recent communications is that the message has changed.  In the past, the headline was always “outsource your operations and realize cost savings.” Now the message has evolved into “outsourcing can help enhance and improve the way you do business.”  This shift begs the question – isn’t ‘improving how we do business’ what every business decision we make should be about? Reducing cost is almost always good, but if your business doesn’t improve, is the change worth making?

In one recent article about outsourcing from Horses for Sources (see complete article here), the author touches on how the view has shifted.   A survey was conducted asking, among other things, “What is the motivating factor to outsource in this unstable economy?”  The top answer?  43% said “greater flexibility to scale our global operations.”  This answer reinforces the idea that companies are spending more time not only looking at how to survive, but also at how to thrive in an unpredictable economy.  And while cost reduction may help in the short term, in the long term you need a strategy that pushes your business forward.  When considering outsourcing, you have to determine whether the solution is in step with your overall strategy.

Why the change in thinking?  The article notes a number of factors, but one of the key drivers is that businesses have become smarter and more experienced with outsourcing, leading them to push their providers for more and changing what and how providers are offering.  It used to be that outsourcing was looked at as a way to just “lift out” routine functions – to have someone else do them and save the cost of doing them in-house.  Now companies are looking at outsourcing those now-commoditized processes as well as looking to find places where the provider can make them more competitive and move their business forward, such as enhanced client reporting and 24×7 global operations administration.

PORTIA’s Outsourcing Services has always viewed outsourcing as a partnership—we are an extension of our clients’ operations, working collaboratively to improve their business.  We can own and perform straightforward workflows and processes (such as system administration, pricing, corporate actions processing, etc.), allowing clients to re-allocate critical resources toward strategic business functions.  And we also help improve business processes by performing specialized functions such as custodial reconciliation, performance analysis & reporting and enhanced client reporting, to name a few.  By sourcing these services from an experienced and proven partner, our clients improve the way their business is done—allowing them to, for example,  enhance the service they provide to their end clients to add value and distance themselves from the competition.

When you’re weighing the benefits of outsourcing, it really boils down to understanding how it makes your business better. If you outsource some or all of your middle and back office functions, how will you reallocate those resources to focus on your core business?  If expanding globally, can the outsourcing provider help you expand your business in a more efficient manner than you could on your own?   Will outsourcing and the outsourcing provider perform services and give you output that provides you with a competitive advantage?  These are some of the key questions to ask when you consider whether to outsource.  Outsourcing should make your business better – if it isn’t, what’s the point?

 – Dan Schlossberg,  Director of Outsourcing Services


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