Demand for outsourcing services increases
Outsourcing is a process of contracting an existing function or process of a business to an independent company or consultancy and not conducting it in-house. Businesses enter into a contract for exchange of services between a business and a consultancy or an IT company etc. Usually the outsourced functions are not a core part of a business in which it specializes, such as HR in an insurance company. The main reason for outsourcing is to save costs in the long run by focusing efforts on developing the business and ensuring its proper functioning.
According to KPMG the demand for legal services increased recently as businesses are now trying to reduce their risk and change their existing contractual obligations. KPMG’s Legal Pulse Survey is based on answers from legal partners of the world’s top 30 international law firms. It revealed that 45% of the partners observed an increase in demand for outsourcing services and 7% suggested a decline in demand which came down from 11% the same time last year.
From the services identified as outsourced, most were development of Apps (mobile applications) at 62%, helpdesk support at 50%, accounting and finance at 26% and HR at 24% with a demand for outsourcing customer services support standing quite high as well.
The disadvantages of outsourcing services are that they take longer than if done within the business itself. According to 41% of the lawyers (a figure which is up from 36% last year) participating in the KPMG’s survey it comes down to the complexity of the deals such as the marketplace causing delays. 27% of the lawyers highlighted the lack of harmonised and agreed standards of contracts, which is a consequence of the reforms with the outsourcing industry.
The fears of financial uncertainty and lack of a long-term prognosis for the business are another reason for a slow progress made with contracts. According to the survey re-negotiating prices and scope of the contracts are some of the more significant concerns.
The increase in demand of legal outsourcing services is good news for the service providers but what is important for the businesses is to understand that contracts are negotiated in a way that is suitable to their nature. No two agreements will be reached in the exact same way as the services provided vary accordingly to the business’ needs. Such contracts are a strong foundation for a business and if drafted appropriately they can attribute to the success of the company. Legal advice should be obtained before strategic and long-term decisions are made. It is no surprise that organisations start to understand the value of lawyers’ knowledge and skills in drafting and negotiating contracts as well as the benefits of obtaining financial advice from accountancy firms as opposed to trying to solve all the matters in-house. Outsourcing some services, even though it may seem expensive at the time, could save businesses a substantial amount of money by preventing litigation, the need for settling contract disputes or consequences of any financial miscalculations.