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Few Vietnamese businesses open to outsourcing study

Update: June, 04/2014 - 08:54

"The effectiveness and cost saving of outsourcing are not realised by many Vietnamese companies, and so the service providers need to increase access to these companies, a potential market," Trinh Thi Tuyet Anh, director of outsourcing at Grant Thornton Vietnam, told Viet Nam News.— Photo thontincongnghe

HCM CITY (VNS) — Most Vietnamese companies are unwilling to use outsourcing despite its benefits like the reduction in management work and payroll without any impact on output, a report released last week by business consultancy Grant Thornton says.

The International Business Report, based on interviews conducted last November with more than 3,300 CEOs, managing directors, chairpersons, and other senior executives from all industry, reveals that only 12 per cent of businesses in Viet Nam are open to outsourcing.

"The effectiveness and cost saving of outsourcing are not realised by many Vietnamese companies, and so the service providers need to increase access to these companies, a potential market," Trinh Thi Tuyet Anh, director of outsourcing at Grant Thornton Vietnam, told Viet Nam News.

In certain cases, enterprises think they could lose control over critical business processes if they outsource, she said.

"For small- and medium-sized enterprises in Viet Nam, the cost of professional outsourcing services will be a considerable expense," she added as a reason for the unwillingness of Vietnamese firms.

Globally too the majority of business leaders have no plans to outsource any business processes in the near future. While the cost savings and process efficiencies that outsourcing can provide are widely recognised, many business leaders are worried about losing control of key processes.

Sixty per cent of global businesses have no immediate plans to outsource a business process. Outsourcing is least prevalent in Southeast Asia (26 per cent), Eastern Europe (31 per cent), and the Nordic countries (33 per cent).

By contrast, more than half of businesses in southern Europe (64 per cent) and Latin America (51 per cent) either currently outsource or plan to.

Trinh Thi Tuyet Anh, director of outsourcing at Grant Thornton Vietnam, said: "Outsourcing is a helpful tool in restructuring manpower; freeing resources from administration, and re-allocating them to operations.

"Accordingly, the enterprise can benefit from lower payroll costs without sacrificing output capacity. Senior leaders of these lean, dynamic organisations also have more time to focus on the strategic priorities for their business."

Among those businesses which currently (or plan to) outsource back-office services, 57 per cent globally cited improving efficiencies — marginally ahead of reducing cost (55 per cent) — as the key drivers. In Asia - Pacific, both figures are 37 per cent.

Of those businesses with no plans to outsource, the requirements to find cost savings (41 per cent) and process efficiencies (33 per cent) are the main reasons that would encourage them to consider it.

Business leaders in the developing economies are more likely to use outsourcing to access expertise: 46 per cent of BRIC (Brazil, Russia, India, and China) businesses cite this as an outsourcing driver, compared with 39 per cent in the G7, and 45 per cent cite mitigating risk through using specialists versus 35 per cent in the G7.

Anh said: "The results clearly show that outsourcing is worthy of serious consideration. Aside from driving efficiencies and reducing costs, outsourcing can allow business to tap into skills and expertise offered by their providers that might not necessarily be as readily available in the local labour market". — VNS

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