A major report has identified that while reducing costs is a primary reason for outsourcing, many businesses also identify reliability, trust and communication as key considerations.

The findings are contained in Grant Thornton’s International Business Report Outsourcing: Beyond Technical Expertise. More than 2,500 business executives in 36 economies around the world were surveyed to help explain attitudes to outsourcing.

Among the report’s key findings are that ‘intangible’ factors, such as reliability, trust and soft skills, count as much, or more than, technical factors such as cost and specialist capabilities in making outsourcing relationships work. It also finds that for most companies a provider’s technology platforms could be decisive and that businesses that outsource services tend not to bring them back in-house, but when they do, service quality and cost are the main reasons.

Richard Ratcliffe, a director at Grant Thornton in the Isle of Man, said the report will be useful for Island companies offering outsourced services, as well as businesses looking for firms to contract work out to.

He explained: ‘The outsourcing of back-office processes is now a well-entrenched business practice at companies here in the Isle of Man and around the world. Approximately two out of every five businesses use it as an important means to reduce costs, improve efficiencies and, in many cases, ensure compliance.

‘This report explores what companies look for in their outsourcing relationships. For companies already outsourcing, or planning to do so, the striking importance of intangible factors in making a relationship work raises new implications. Any due diligence being conducted needs to consider softer skills, and the fit from a relationship perspective, as well as the traditional procurement factors of costs and service level agreement.

‘For outsourcing providers, there is a clear need to invest in these intangible aspects. These can often be overlooked, but are clearly highly valued by businesses.’

Outsourcing: Beyond Technical Expertise reports that payroll and HR are the most commonly outsourced processes, with 34% of respondents either currently outsourcing them or planning to. A smaller share (27%) currently outsource or is planning to outsource finance and accounting processes. It also finds that, contrary to perception, outsourcing of back-office processes is as prevalent among large firms as small companies.

While 43% of respondents said cost was an important factor, it was clear that it was not always a primary selection criterion.

Mr Ratcliffe said: ‘Companies that outsource expect their service providers to have all the specialist skills, internal processes and IT systems needed to deliver the contracted services. However, there is more than technical expertise behind any good outsourcing relationship; non-technical skills count too. “Intangible assets”, or the soft skills a provider brings to the relationship, are more often the main contributors to a successful outsourcing experience.’

The report identifies communication (88%), quality of relationship (87%) and provider’s experience (82%) as major factors. Responsiveness is also important, with 74% of respondents saying their lead outsourcing provider can meet them at very short notice, often within 24 hours. It concludes that once a business process is outsourced, it tends to stay that way. Around eight out of 10 UK businesses have never brought outsourced processes back in-house, with those who do saying it is down to cost, quality of service provided or it always being the intention to restore the internal process.

Mr Ratcliffe said: ‘The report includes six recommendations for providers and their clients, to help improve outsourcing relationships, and I believe these will be helpful to companies in the Isle of Man looking to outsource back-office processes, or offering those outsourcing services.’

You can download the IBR report Outsourcing: Beyond Technical Expertise from www.grantthornton.co.im.