As the green shoots of economic recovery begin to show, a number of reports are stating that outsourcing is ‘on the rise’ – declaring that businesses across a range of industries are now ready to look again at investing in offshore outsourcing. Businesses once more see outsourcing as a way of reducing costs, take advantage of the world’s most skilled workforces and generally improve their business processes.

Yet with this good news come equally striking warning signals. For many organisations, immediate cost savings remains the number one concern when looking to outsource. However, taking a cost-only approach is dangerous as businesses will often look to outsource to the regions with the lowest costs, ignoring things like quality and business innovation.

Although it’s easy to see why initial cost savings would be attractive, especially to companies struggling to survive day-to-day, such benefits aren’t necessarily enough to sustain long-term success. In order to be successful, businesses must change the way they work with outsourcers and change the focus of that relationship. In short, long-term benefits led by continued innovation – whether in technology or business processes - must now be the heartbeat of the industry.

Moving away from the familiar

Historically, businesses looking at offshore outsourcing have been attracted by initial cost savings such as lower staff overheads, lower land or rent charges and so on. However, focusing only on these areas means that organisations can be hit by hidden costs they weren’t anticipating.

Traditional offshore destinations, such as India, don’t always lend themselves to continual cost savings and efficiency. Firstly, these regions are far away from UK business hubs and therefore sites can be very difficult to manage effectively. Many businesses are now finding that offshoring to a different time zone can be disruptive. If mistakes are made it can take 24 hours to have them rectified rather than making a quick phone call. Face-to-face meetings can be even more problematical, as this will require days out of the office rather than just hours.

Outsourcing based on cheaper day-rates means companies are risking drops in quality and therefore does not support long-term success. Simply put, an organisation outsourcing its business functions is not guaranteed the highest quality of service if it has opted for cheap rates. The old rule ‘you get what you pay for’ may have been unpopular in the recession but it’s a fact. If businesses want to get the most out of outsourcing, investment with one eye on the future is needed. This may means higher initial costs but it will result in more substantial gains in the future.

With this in mind, it’s clear that the focus must shift from day-rates to sustainable savings that will ensure stability within the offshoring industry and within the businesses buying into it. In short, cost cutting should no longer be the outsourcing industry’s most effective selling point.

Innovation is the key

A key advantage of offshoring is you can work with regions leading the way in a particular industry. Companies benefit from the knowledge-base and put in place the kind of infrastructure and business process that’ll set them apart in the long-term. As always, the region a company chooses can dictate how substantial any savings will be. However, this shouldn’t be based purely on where the cheap labour lies.

Nearshoring to regions within the EU is one option for UK companies, potentially offering more long-term savings that will last years rather than months. There is a wealth of highly-skilled staff, who have extensive experience in complex projects, not to mention a close geographical and cultural affinity with the UK. For instance, regions such as Spain have proven track-records, developing efficient business processes for global brands such as Zara and Santander.

Look to the future

Although day-rates remain the priority for many companies looking at offshoring, it’s up to the outsourcers to show them that ‘quick win’ focus only gives brief respite. It does not lead to success in the long-term and offers little benefit to a global outsourcing market trying to prove its worth as budgets become available post-recession.

As businesses come out of the recession and look again at outsourcing, it is imperative to both the survival of those companies, and to the outsourcing industry as a whole, that innovation and value for money become the number one priorities.

In order to rise out of the economic gloom, companies must start to think strategically – the more advanced a company’s business methods, the more sustainable and substantial cost-savings will be.