Digitalization For Small Businesses To Drive Recovery. Where Can Outsourcing Come In?
Small businesses are the backbone of the global economy, accounting for 90% of businesses, 60% to 70% of employment and 50% of GDP. It is only possible to achieve a strong and sustained global economic recovery if these businesses are able to adapt effectively to post-COVID consumer behavior. Digitalization is the great equalizer in this case.
Small businesses will benefit from digital technology for several reasons. As a result of the adoption of mobile devices, people are more likely to experience the benefits of digitalization. As mobile device users increase from 6.38 billion in 2021 to 7.52 billion in 2026, the digital shift will only accelerate.
The way people shop has been changing for years. Brick-and-mortar stores will always have a place, but online shopping is the future. According to Morgan Stanley, the global e-commerce market is expected to grow from $3.3 trillion today to $5.4 trillion in 2026, an increase of more than 60%.
Digitization is the Cure
Digitalization has clear benefits for small businesses. Because their online channels mitigated the loss of in-store shopping, businesses with a strong digital strategy were better equipped to handle the downturn. The Organisation for Economic Cooperation and Development (OECD) found that businesses that invested in their digital futures had better communications and a smoother entry into global markets.
Small businesses that prioritized digital transformation saw their revenue growth double the rate of those who just started – and eight times higher than those who didn’t prioritize digital transformation.
According to the OECD survey, up to 70% of small businesses are intensifying their use of digital technologies as a result of the pandemic.
Digital transformation is one of the permanent effects of the pandemic. Over the past two years, many businesses have adopted and adapted to technology.
The outsourcing industry is not immune from the effects of the pandemic. The outsourcing industry is at a pivotal point. Experts say traditional outsourcing is on its way out. Outsourcing is evolving into a more tech-inclusive process.
Mckinsey & Company examined the potential of tech-inclusive outsourcing. Although most outsourcing firms are becoming more digital and technologically advanced with artificial intelligence and machine learning, they say there is still room for growth in this area.
According to their research, companies worldwide spend an estimated $230 billion on managing business processes, but only a small portion on technology.
Outsourcing is the Way Forward
Businesses used to outsource business processes to save money a decade ago. On the other hand, automation is limited to basic tasks. Today, outsourcing and technology work work together to execute tasks in a more efficient and cost-effective manner.
According to McKinsey & Company, new-age outsourcing will fully integrate machine learning, automation, and digitization. Outsourcing of this type isn’t yet common, but it will be common in the very near future.
Therefore, this is still an untapped investment opportunity. According to the study, service buyers and providers can leapfrog ahead by generating differentiated advantages in operations and significant bottom-line value in this area.
However, McKinsey & Company warns that the window for capitalizing on these advantages is closing. It is likely that these deals will become table stakes in a few years. Now is the time for companies to take the initiative.
From 2016 to 2020, digital services grew from 30 to 70 percent of total contract value (TCV), and the number of new deals with a digital component rose to almost 50 percent. Customers’ demand for digital products and services has grown exponentially, companies report, which explains this rapid growth. Across industries, cloud technologies are also being adopted worldwide. According to the analysis, cloud-enabled deals reached 67 percent of TCV in the private sector in 2020 and 63 percent in the public sector.
To reduce cycle times for data-intensive processes, many BPM providers are leveraging cloud-based systems. Including digital into an outsourcing contract can deliver two to three times more impact than traditional models, while also improving the customer experience.
Digital Outsourcing Success
With so many factors at play, digitization and outsourcing can seem daunting. But it doesn’t need to be. Keep these in mind throughout your digital transformation process and you’ll be on your way to success.
Innovation-aligned incentives – technology and its applications are still evolving, as is the value they can unlock. Through arrangements such as gain sharing, companies can incentivize innovation throughout the entire contract term.
Designing digital journeys end-to-end – processes are being redesigned to take advantage of digital, and companies can no longer outsource a single, fragmented slice of a process. For maximum impact, the provider should own-and transform-the entire end-to-end process, through optimization, digitization, automation, and removing manual processes and tasks.
Taking responsibility for digital transformation and adoption together. Digital sourcing calls for a joint governance structure, as opposed to the hands-off arrangements of the past. Teams from both organizations develop and monitor a comprehensive set of KPIs, including customer satisfaction.
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