“Cost not a key priority” as NZ business leaders reveal top outsourcing criteria

“Cost not a key priority” as NZ business leaders reveal top outsourcing criteria

When businesses in New Zealand outsource work, cost is not the key driver.

When businesses in New Zealand outsource work, cost is not the key driver.

That’s according to Grant Thornton’s latest International Business Report (IBR) survey, which claims human resources, payroll and accounting are the most common services that are outsourced with many Kiwi companies engaging external specialists to execute these cost effectively.

Matt Parkinson, Partner, Privately Held Business at Grant Thornton New Zealand, says that it could easily be expected that cost and the providers’ technical expertise are the most critical success factors in outsourcing relationships.

"However, to make these relationships work, the IBR survey reveals that communication, reliability, trust and other non-technical skills count just as much, if not more, than harder factors such as specialist capabilities,” Parkinson says.

“Although still rating highly, the cost of services isn’t the most important criteria when selecting an outsourcing provider.

“For business leaders, particularly in New Zealand, cost rarely ranks as a top priority.”

When asked which criteria was most important when selecting an outsourcing provider, New Zealand business leaders surveyed said that a track record in servicing similar organisations (46 percent), trusting the supplier (36 percent) and understanding their businesses (36 percent) influence their decisions the most.

As explained by Parkinson, the cost of services ranked a distant fourth in New Zealand (18 percent).

“Naturally, providers need to deliver on time and to a high standard and they also need to help clients remain compliant with regulatory requirements, which explains why trust is such an important factor for businesses,” he adds.

“Communication is integral to building high levels of trust, and responses in the IBR survey demonstrate how vital this is.

“Participants ranked communication considerably higher than the provider’s project governance and resource management experience.”

Parkinson says that 91 percent of New Zealand business owners stated that good communication is a key driver that contributes to a positive outsourcing experience compared with the global average of 88 percent per cent.

New Zealand also ranked 22 out of 35 countries in this area; 100 percent of participants in the top seven countries deemed communication as an essential part of distinctive client service.

Parkinson says that among other things, good communication practice means being ultra-responsive, and being proactive is another part of the trust and reliability equation.

Three quarters of business leaders around the globe say it’s important that their lead outsourcing provider is able to meet with them at very short notice - within 24 hours - should an issue arise.

Furthermore, Kiwi companies want their providers to be on the lookout for ways to streamline processes. Good providers also listen to clients to improve their service.

“The digital age has delivered tougher competition and businesses increasingly rely on their suppliers - including their outsourcing providers - to help them design better business processes,” Parkinson adds.

“The criteria and skills that clients judge their outsourcing providers on is clearly evolving.

“Providers must adapt to create a new point of difference in an increasingly competitive market."

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