There is increased sourcing interest in the South African market, mainly driven by organisations' need to reduce operational costs and improve process performance.
This was one of the biggest findings of the KPMG South African Sourcing Pulse Survey, which, among other issues, discovered that the need to support business' growth agendas is a key driver of sourcing, which is in line with the opportunities presented by the African continent.
According to KPMG, service providers cited IT as the top function area for sourcing demand, followed by work that bundled various business functions with IT.
The survey also discovered that the government, healthcare and consumer packaged goods sectors have shown an upward trend in the adoption of sourcing services.
In SA, the consultancy firm notes that top functional users of sourcing services include IT, finance and accounting, and human resources.
Presenting the findings in Johannesburg yesterday, Fritz Dannhauser, associate director for shared services and outsourcing at KPMG, said 80% of South African advisors in the sourcing market stated that the key driver to undertaking service delivery improvement initiatives is reducing costs - a view consistent with the global pulse survey results.
However, he noted that this level had decreased slightly from the 93% score registered in the previous survey.
"These findings illustrate that, while reducing operating costs is clearly the top driver for global business services efforts, organisations are not pursuing this goal unilaterally," said Dannhauser. "Rather, reducing costs has become the base level prerequisite for any improvement effort."
He also added that, over the past three years, there has been an increase in local organisations' interest in the use and expansion of shared services operations to support various back-office functions and processes in areas like IT, human resources and procurement, as well as, increasingly, front-office activities such as analytics, and sales and marketing support.
"While some have seen sales as a precursor to outsourcing, there is a range of scenarios and situations where buyers see shared services as complementary and/or preferable to the use of outsourcing," Dannhauser pointed out.
In some cases, he added, this is because of the nature of work being performed, and in others, it is more simply because buyers feel they can perform the work better or cheaper than an outsourcer.
According to the survey, the top sourcing functional area for existing shared services deployments, cited by 68% of the advisors, is IT operations, followed by finance and accounting as well as human resources - both at 58%.
KPMG says, based on its observations in this market, these functions have always been the top three in terms of shared services uptake.
Among the challenges the sourcing market is facing is lack of skilled talent and an inability to attract and retain talent, KPMG says.
Most respondents also lamented the problem of inadequate and antiquated IT infrastructure systems; dysfunctional and fragmented organisational operating models, designs and processes; as well as competitive pressures from emerging market competitors and inadequate or local market physical infrastructure.
KPMG notes that the challenges resulting from the infrastructure issues are prevalent on the African continent.
Also speaking at the event, Vandana Ramani, associate director for shared services and outsourcing, said the market needs smart and innovative management processes.
She also revealed that service providers show more enthusiasm than KPMG advisors for IT-related capabilities and enablers, scoring business intelligence and harnessing big data, as well as cloud computing, much higher than advisors, a trend that can be attributed to service providers' offerings on the market.
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