Much like the plot of a disaster movie, the COVID-19 pandemic hit the entire globe in a matter of hours. From one country, it spread like wildfire across the whole planet while we all stood aghast at the chaos it was creating before our collected eyes. Before we knew it, people are losing their lives left and right, life as we know it has ceased its functions, and we all face an uncertain future. This is not a movie, however—this is reality unfolding before us.
Governments across the globe imposed lockdowns, and borders were closed. Travel was restricted, school was indefinitely suspended, and businesses were halted. After several months of the lockdown, some of these businesses were forced to close their doors permanently.
Why Outsource?
Among the industries greatly affected by the lockdown imposed by the pandemic were outsourcing and managed services. Small to medium enterprises typically engage outsourcing and managed services companies to accomplish essential but not primary functions for their business in order for them to focus on their primary business such as manufacturing, agriculture, etc.
Outsourcing and managed services companies are the specialists here. They provide services related to IT, human resources management, back-office functions such as accounting, quality audit, market surveys, data entry, telemarketing, logistics and even call center functionalities, among others.
The advantages of engaging outsourcing companies are varied: first, SMEs are able to focus fully on their primary business, whatever that may be. Some businesses require major efforts in R&D to deliver on the needs of its target consumers. Second, outsourcing greatly decreases the number of personnel needed to run the business. Back-office functions are relegated to efficient outsourcing companies like EZY Outsourcing Hub in accomplishing other key tasks. Thirdly, outsourcing companies cost relatively lower than if an SME would keep back-office personnel on staff.
How the pandemic impacted the outsourcing sector
Six months since the lockdown began, statistics has shown that 55% of businesses have either partially or permanently shut down, among them major clothing brands, giant entertainment companies and restaurant chains. Filing for bankruptcy, however, does not mean a company would definitely go out of business, as in a lot of cases, this simply means that they are financially restructuring. With a lot of these companies not running their business, outsource providers are also at risk of closing down due to unsustainable operations.
Outsourcing Key Areas Affected by the Pandemic
Work-from-Home Arrangements
A key component provided by outsourcing and managed services agreements is the provision of personnel at the client’s site and location of offshore personnel at secure delivery centers. A major consideration of these physical location restriction is the permissible technology when accessing a client’s systems which calls for hardened desktops use only, or other such security requirements. But due to the massive lockdowns, these prohibitions on working onsite could not be met. Still, these have to be met at least on a short term basis in order for the business to continue functioning.
The stop-gap measure is to put in place minimum protocols that would enable outsourcing companies to continue to deliver on services from a work-from-home set-up, with strict implementation, of course. Other rules and provisions (when resumption of business takes place) should then be discussed by the client and the service provider organization.
Travel Restrictions
Another major area affected by the lockdown are travel restrictions whether within the country of operations or outside it. Especially affected are travel between US and Europe, where most client hubs are, to countries such as India, China and Philippines, where most offshore delivery centres are located.
Since the pandemic hit, there has been a sizable downturn in in-country and international travel. While short-term travel restrictions are generally seen as acceptable, long-term consequences on the outsourcing and managed services industries should be seriously assessed as these would impact cost, ability to deliver and loss of skilled personnel.
Operational Changes
Another major area affected are projects that clients have in the pipeline that needed to be put on hold. However, this is not easy as contracts have already been drafted and in some cases, signed, that need to be honored. This is where flexibility comes in from both sides of the fence, i.e. the client and the outsource provider, to come to terms that would be beneficial to both parties. Renegotiating deliverables and cost is the key to successfully transitioning to the new normal.
New opportunities for outsourcing
The new normal is calling for a new way of doing business, and this primarily means that more companies are downsizing in staff, which means more back-office functions will be outsourced. This would enable companies that have lost revenue over the last six months to recoup their losses and take back their market share. Less staff, more revenue.
Don’t despair, though. Previous employees skilled in back office functions may now turn to outsourcing companies for employment. Jobs were not really lost—they simply transitioned to a different format, as these are still essential functions.
The new normal does not mean restricted business opportunities, but rather a new way of doing business, and outsourcing and managed services providers are now key players in all industries, as they provide essential functions in any business.
