More than merely accessing a service

Case studies reveal positive success stories which belie outsourcing’s negative public image, as Charles Orton-Jones reports

Scott Tibbles is the entrepreneur behind SmartCam Direct which sells dashboard cameras for cars. These are the ideal gizmos to record journeys for security and insurance purposes.

When Scott founded the firm in 2011 he managed everything himself, including the packaging and mailing of the cameras. Big mistake.

“It was an extremely time-consuming part of the process,” he says. “Looking back, I spent an awful lot of time in queues at the Post Office. And it was very frustrating because there were far more valuable ways to use my time.”

So Scott outsourced. He hired P2P e-Logistics to take care of warehousing, distribution, invoicing and account management. “The whole thing requires minimal effort on my part,” he says.

Since the arrangement sales are up 64 per cent, and Scott is free to focus entirely on the important bits of his business, marketing and product testing.

The story is a great advert for outsourcing. In truth there is an abundance of inspiring stories in this sector. It’s an industry with a spring in its step. The UK outsourcing market is already worth £207 billion or 8 per cent of gross domestic product, according to Oxford Economics. That’s 10 per cent of the nation’s workforce.

As the industry matures the examples of outstanding outsourcing grow more impressive. Take Nisa, the convenience retail chain. It has 4,000 stores with sales in excess of £1.5 billion. It moves 108 million cases a year. Yet the entire Nisa logistics department consists of just two people. Two! The operation has been completely outsourced to DHL.

Stories such as these ought to ensure outsourcing gets the recognition and support it deserves

One half of the two-man team is Jon Stowe, Nisa’s distribution director. He says there is a long list of reasons why Nisa outsources rather than managing everything in-house. “For starters, it would not give us value for money to do so,” he insists.

But there is also an environmental benefit. “DHL has a recycling division, Envirosolutions, which recycles plastic and cardboard for us. That is part of their service.”

Nisa benefits from liaising with DHL’s other customers, through vehicle sharing, for example. An arrangement with JD Wetherspoon in rural Scotland means Nisa’s vehicles carry both firms’ goods, generating revenue for Nisa. Deliveries in the South East are shared with BP garages.

Mr Stowe emphasises the other services DHL bundles in with its service, such as benchmarking, helping Nisa hit carbon-reduction goals, and consulting on Nisa’s operational efficiency. “It is a really deep partnership,” he says. “You really can’t think of it as merely us accessing a service.”

Stories like this ought to add some much-needed lustre to outsourcing’s image. Repeated studies suggest there is a wariness surrounding outsourcing, in both the minds of the general public and in senior professionals.

A National Outsourcing Association (NOA) poll suggests 80 per cent of the public “do not think outsourcing is beneficial to UK plc”. A poll by SKS and Loughborough University found 70 per cent of chief finance officers in small and medium-sized firms thought that offshoring or outsourcing financial work to another country was not acceptable.

The NOA’s response has been to launch an Outsourcing Works campaign, which uses real-world case studies to prove the repeated success of outsourcing. There are few common themes.

Capital costs are slashed. When Dariush Zand set up mobile network Ovivo he outsourced the contact centre operation because he simply lacked the money to build and run his own centre.

Access to expertise becomes simple. Flooring firm Harvey Maria outsources its IT operation to NetSuite. Founder Mark Findlay relies on NetSuite to install and maintain his accounting, billing, customer relationship management and e-commerce functions, specialisms he would have struggled to manage himself.

Outsourcing offers flexibility in terms of capacity. Travel operator Thomas Cook uses Accenture to handle its accounts and back-office processes, knowing that Accenture has vast resources at its disposal to handle any volume or work.

Also outsourcing can be greener. When the National Trust handed over its data centre operation to IT services provider Adapt, it measured a fall in power consumption of 70 per cent attributable to Adapt’s use of server virtualisation and superior physical infrastructure. And since Adapt uses biomass power, generated by woodchip and fibre fuel, there is a further saving in carbon emissions.

In addition outsourcing saves money; sometimes, a huge sum of money. London Underground outsourced its disputes resolution to specialist agency CMP Resolutions. With 12,000 staff working under difficult conditions, London Underground was dogged by a painfully high dispute rate. CMP Resolutions introduced new processes, provided superior mediation and handled paperwork far quicker than London Underground could manage internally.

There has been a reduction of 75 per cent in bullying and harassment cases, and Alexandra Bode-Tunji, senior business partner at London Underground, estimates a saving of £3 million over a four-year period.

These are the stories the industry needs to shout about. Outsourcing has its doubters. Stories such as these ought to ensure outsourcing gets the recognition and support it deserves.