While at first glance partnering and outsourcing may seem synonymous, they really are fundamentally different concepts. Depending on your long term company goals, both strategies are viable methods for improving profitability. Here is a little insight to help you determine the appropriate circumstances for using each of these strategies.
Outsourcing to reduce costs
Eight out ten of America's fastest growing companies now use outsourcing. Outsourcing happens when a company determines specific tasks are better and more efficiently performed by a provider outside the company that specializes in that particular field. For most companies, cost savings is the main reason for outsourcing. Outsourcing is usually a profitable option when outside providers are more efficient or better able to achieve economies, are capable of reducing over-head or debt, or are able to save on the cost of benefits and administration. According to Coopers & Lybrand, in their independent study of high growth companies, growth companies are saving an average of 13.9 percent as a result of out-sourcing, significantly higher than the 7.8 percent found only three years ago.
While cost savings is the main reason for outsourcing, it is clearly not the only reason. Outsourcing enables a company to benefit from the knowledge base of the outsource company, which can often provide expertise on complex business issues and processes that are not among the firm's own core competencies. By using outside professionals, management can focus on issues related to growth of the core business. In the administrative/ finance areas, the functions most frequently outsourced are payroll, tax compliance, internal auditing, accounting and human resources/hiring. Internal operations primarily in the areas of manufacturing, processing and assembly are outsourced by almost half of the fast growth firms surveyed. Outside maintenance and equipment services are used by 19 percent, and information technology outsourcing is used by 17 percent; up eight full points from three years ago. Sales and marketing are a rapidly growing outsourcing category as well; up nine points in three years. Web site management, a new outsourcing category; is used by 11 percent of fast growth companies.
Partnering for the future
Partnering promotes a win-win situation for both companies. Instead of paying an out-side vendor to merely perform a task for a fee, partnering puts two companies with differing strengths together to create something much bigger Something along the lines of "the whole being greater than the sum of its parts". Each company brings a level of expertise, or distinction, that benefits the other. Both companies grow and create a better product or service jointly than they could have done individually.
More than half of America's fastest growth companies have partnered with other companies over the past three years to improve existing product lines or devel-op new products or services for an already existing marketplace. In Coopers & Lybrand's study, typical growth firms over the past year were found to have participated in over six (6) partnering arrangements each, resulting in significantly higher growth rates, larger revenues, more innovative products and greater productivity. Overall, more service sector growth firms have been involved in partnering over the past three years than ever before. Especially high levels of partnering were noted among computer-related services and consultants.
While with outsourcing the prime motivation is cost savings, the real payoff of partnering is not necessarily to reduce expenses. The four major benefits of partnering are
Of primary importance to companies involved in partnering is the ability to achieve significant breakthroughs in innovation and creative marketing. Partnering companies collaboratively spend more resources on new product development while focusing more on bigger opportunities and innovation. These partnering pioneers' are on the cutting edge of their industries and won't hesitate to go outside their own organizations to develop relationships with others in the development of their innovative new products.
Telman has been a pioneer in partnering with hotel management companies for over ten years. Call Jan Stringer, Vice President Sales at 1-888-4-Telman for information about how we might help you focus on the big opportunities and leave the details to us.
Daniel F Prosser is the founder, president and chief executive officer of Telman. Begun in 1986, Telman creates technology partnerships with hotels and hotel management companies that maximize the return on their technology investments. Prosser in on the board of advisors for Hotel & Motel Management Magazine and has written several articles for industry publication. He also makes regular presentations for hotel and technology conferences and associations.
For Additional Information Contact the Firm at: