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Getting Down to the Business of Business

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SA companies looking to improve their efficiencies in a global market are
increasingly opting for outsourcing as they re-engineer their businesses,
writes DAVID JACKSON
Getting down to the business of business
OVER the past decade, many of the world's leading brand names and major
financial institutions have re-engineered their businesses and, in so
doing, they have redefined the nature of their core activities.
These companies have entered into contracts to outsource their non-core
activities which, in the past, the major corporates have traditionally
provided in-house.
In South Africa over the past 25 years, many of the "softer services",
such as cleaning and catering, have already been outsourced. Out of this
early beginning grew several specialist cleaning companies and the
emergence of specialist catering firms in the hospitality-services
industry.
The move began essentially in the private sector but, in the past 15
years, elements of the public sector have also begun to outsource these
softer services.
Now the global market has arrived in South Africa, and companies across a
wide spectrum are competing head-on with international firms which have
already re-engineered and gone through the process of outsourcing.
This process has not been confined to softer services, but has been
extended to the larger and more extensive non-core infrastructural
elements, such as mechanical and electrical systems, building-fabric
maintenance and information technology and technical services.
Internationally, many of these companies are selling their buildings and
leasing them back from financial institutions, recognising that owning
buildings is not their core business function. They have also sought out
companies that are able to take care of the full range of services around
their core business.
Graham Tracey, the managing director of Drake & Scull International FM
Ltd, says outsourcing took off in Britain, Europe and the US as markets
became more competitive, driven by recession.
Companies had to become more efficient and reduce costs, and they found it
difficult to do that effectively through in-house facilities managers, who
were often constrained by internal political pressures and vested
interests. Often, they also lacked the expertise to manage the change.
Change within a company is a major challenge to any chief executive. By
outsourcing to professionals, the outsourcing company becomes the change
agent and a company is able to re-engineer and reposition itself more
quickly and efficiently.
Says Tracey: "SA companies are looking to improve their efficiencies in a
world market. They need to re-engineer, and an outside agent like a
specialist outsourcing company can be a catalyst for change."
He believes the local outsourcing market can learn from the international
experience - but with an important difference.
In the UK, outsourcing in the 80s was driven by the construction
recession. Consultants, architects, construction contractors, mechanical
and electrical contractors, quantity surveyors and property agents saw
facilities management as an opportunity to plug the gap caused by a loss
of business in their core activities.
"The SA market will not have all these emerging facilities management
businesses coming from a range of different disciplines," he says.
"It'll be a more structured growth, with international firms which will
bring with them a decade of experience and knowledge."
James Fitzgerald, the managing director of EDS Africa, says the trend to
outsourcing has become one of the most notable features of business in the
90s and it is likely to intensify.
"Worldwide, across all industries and in the private and public sectors
alike, more and more business managers are turning to outsourcing as the
answer to their problems."
He says the main factors driving outsourcing's popularity are:
An acceleration of change - not just in IT, but in most aspects of the
business market.
An avalanche of innovations, each one presenting opportunities for
increasing competitiveness and enhancing business performance. Perhaps the
most notable example, he says, is the Internet.
Global competition. The convergence of telecommunications, computing and
information services has made it easier than ever for companies to compete
worldwide.
"Oceans, mountain ranges and national borders are no longer a major
consideration, and language barriers are rapidly disappearing," he says.
"It's enough of a challenge for most businessmen simply to protect their
established customer base from global raiders. To aggressively expand
their operations into new markets requires something extraordinary."
Downsizing/restructuring. A response to all of the above has been the
move to smaller, more flexible and agile and more focused businesses.
Processes are re-engineered and operations streamlined.
"We've seen the end of the monolithic organisational structure and the
emergence of operations that separate out the customer-facing activities
from the back office."
Third era of IT. The first was process automation, using the computer to
run what used to be manual processes. Then came the re-engineering of
these processes to make them more efficient.
In the third era, IT is being used to redefine organisations and markets.
"It has become a strategic tool that is being used to reinvent the market
and the kind of organisation, structure and processes needed to address
this market.
"This is why, for the first time in its 50-year history, IT has become a
key issue for the chief executive."
Fitzgerald says the focus of outsourcing must be on business, not on IT.
"IT in isolation cannot improve anything. It must be tightly harnessed to
the business processes it supports," he says.
"Too often in the past, business processes have been retrofitted to new
information systems. If the processes support the business strategy and
the information systems are built in parallel to support these, then
maximum benefit will accrue.
"This means that those responsible for delivering IT must be present at
the boardroom table when the planning starts, and they must continue that
close relationship throughout the change process."
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