Rise of on-demand outsourcing

Speedy communications and impatient customers are forcing organisations into new ways of working . Outsourcing to third parties on a pay-as-you-go basis is one solution growing in popularity

The world is speeding up. Decades ago tasks we now think of as five-minute distractions could take all day. People allocated more time to things, moved at a slower pace and generally expected less of the organisations that served them.

Today it’s quite different. The internet means activities – ordering, bill paying, information gathering, life organising – are done quickly and without a second thought. It’s only when the system breaks that we notice it’s even there.

Meanwhile, instant access to information means individual impulses can develop into almighty groundswells of public action that lurch the world in different directions. The implications for organisations are colossal. They must react satisfactorily or enrage the beast that is public opinion.

Within this maelstrom of activity, firms are tossed about like dinghies on rough seas. They are plugging gaps, reacting to peaks and flows in demand, and allocating resources according to the shifting sands of customer fancies.

But companies can’t invest for peaks in demand all year round; it would bankrupt them. They need the flexibility to call in the cavalry as circumstances change, paying more when more is required and scaling back when the coast is clear.

In the business, they call this process on-demand outsourcing. Its growing appeal is evidenced by the range of organisations using it, from large companies anticipating workflow peaks to smaller ones strategically employing it to help them try things risk free.

Users of on-demand outsourcing

“Businesses increasingly turn to outsourcing for a variety of reasons,” says Jeremy Payne, a director at Enghouse Interactive. “For many it serves as a low-risk way of scaling their enterprise while they prove the success of a new business model or evaluate a new market, product or sales approach. Others look at it as a way of effectively paying as you go as opposed to making larger capital investments up front.”

A company launching a popular new product will need to create temporary capacity to deal with a surge in demand. That could mean extra warehousing, logistical support, call centre personnel, computing power and even more salespeople.

And suppliers are increasingly happy to help take the strain. Technology business VMware offers its customers an IT boost when and where they need it. General manager for cloud services Gavin Jackson says there is a range of reasons for growing demand.

On-demand doesn’t have to mean last minute, and many buyers of services are adopting a strategic approach to scaling up and down through third parties

He says: “Having immediate access to on-tap computing resources is essential, whether it means entering a new geographical market, supporting more mobile business users or planning ahead for resource-intensive peak business times, such as the Christmas sales in retail, online tax returns in government and other seasonal peaks.”

Even Amazon is getting in on the on-demand act. It has launched a “print on demand” service for publishing companies that suddenly experience unexpected surges in demand due to world events, celebrity endorsements or changing trends.

“We offer this service to publishers as a way of guarding against this type of unplanned demand, ensuring that books can remain in stock for customers when physical inventory may not be available,” says Amazon’s Javier Rosales. “Print on-demand means we can print the book when the customer order comes in, which allows us to fulfil customer orders as normal, even if the title is not on the shelf.”

NEW ENTRANTS

Despite its growth, the ecosystem for on-demand outsourcing is relatively immature and new entrants appear all the time. These range from large players that have diversified their services, to smaller niche businesses winning new clients with their “safety-valve” offering.

“The abundance of options is making this a really competitive market,” says Radiant Law’s Andrew Sutherland, who advises companies on outsourcing contracts. “Ultimately, customers are benefitting through suppliers having to price really aggressively in order to win new business. This is true across all sectors, but especially so in retail and financial services.”

Ironically, brands using the on-demand vehicle most effectively are those that predict future trends and plan. On-demand doesn’t have to mean last minute, and many buyers of services are adopting a strategic approach to scaling up and down through third parties.

Jeremy Vernon, director at Core Fulfilment, says: “Brands who know their customers well and understand their buying behaviour will obviously be able to plan better. Questions to ask include do they buy what they need in advance or are they last-minute shoppers and will they purchase one-off items or buy in bulk?

“Using all the information you have about your customer base to forecast the correct level of stock, human resources or machinery is key and is something an outsourced fulfilment partner should help its customers to achieve.”