There are over 907,000 small and medium-sized enterprises (SMEs) in Malaysia, representing 98.5 percent of businesses in the country. Yet, they collectively contribute only 36.6 percent of GDP in 2016. One of the reasons for this is the relatively slow adoption of digital technologies that can improve their efficiency, raise productivity and increase revenue.
To many companies, the extent of “digitalisation” is to purchase several PCs to handle accounts and payroll, track inventory, correspondence and perhaps a customer relationship management (CRM) software. Basically, each department will have some computers that perform tasks specific to that department. They view technology as an expense that depreciates in value rather than an asset – to make matters worse, hardware and software require upgrades and repair which translates to additional costs.
This can be mitigated by outsourcing the company’s technology requirements to external parties. They can farm out the company’s payroll and human resource administration, finance and accounting, customer care and procurement to service providers who can manage these services professionally. In short, they can hire rather than buy technology.
Cost-Effective with BPO
“Lowering costs is one of the primary reasons why SMEs choose to outsource their IT and business processes,” said Yeo Swee Key, director of commercial partners and SMC, Microsoft Malaysia. “By outsourcing, SMEs can save on a multitude of fixed costs and create opportunities for the business to invest their capital on other areas that can generate revenue.”
In smaller companies, employees are often required to multitask and handle more than one function. By outsourcing these business processes, the staff can be redeployed to focus on critical functions.
Business processes outsourcing (BPO) lets SMEs reduce their manpower requirements. This is helpful given the difficulty in hiring good staff, especially when it comes to technical staff for the IT department. Such staff often demand high salaries and prefer to work with large multinational conglomerates. Sad to say, there is no glamour or prestige working in an IT department of a local SME compared to working for a tech company or start-up.
However, SMEs can leverage on experts without having to employ them. “Outsourcing companies often employ highly talented individuals who are specialists in their respective fields, able to deliver work in a timely and cost-effective manner,” Yeo added.
With the nitty-gritty handled by the outsourcing companies, the SMEs’ management only needs to access the data and reports via a web browser or a phone app. They can also get insights and advice from the experts on how to optimise their processes and spot growth opportunities.
One of the hidden benefits of outsourcing is reduced exposure to risk, said Yeo. SMEs are not saddled with aging computers or legacy systems that are difficult or expensive to maintain and upgrade. “The risks involved with the technology that is used would be borne by the outsourcing partner. Not only are they equipped to deal with such risks, they can also provide counsel in terms of risk reduction and mitigation where the need arises,” he said.
This is important because technology risks can be very expensive. Large corporations can absorb technology risks, which represent a small percentage of their revenue, but not SMEs. This is a major reason why SMEs are slow in embracing digital transformation beyond just buying a few PCs and software.
Customer help lines have traditionally been manned by human operators. Interestingly, this is also an outsourced industry with the Philippines and India leading the market due to their abundant supply of cheap labour. However, human operators are prone to error and may even antagonise customers. Not surprisingly, even in China where labour is cheap, automated chatbots are deployed to engage customers.
With artificial intelligence, chatbots can understand spoken customer queries and respond accordingly. Their accuracy keeps improving as the system is capable of learning from each interaction.
More importantly, the data collected can provide important insights when business analytics are applied. SMEs can learn about the frequency and nature of enquiries or complaints, caller demographics and preferences, and so forth. This can help them improve their products and innovate new ones. The cost of setting up such a system in-house will be prohibitive for an SME but not so if they engage an outsourcing company.
BPO companies usually charge monthly retainers or by volume of transactions. Monthly retainers can be likened to employee salaries; a volume-based model means SMEs can keep their costs low and only pay more as their business grows.
Plan for Outsourcing
To begin the outsourcing journey, the management needs to put together a roadmap and decide what should and should not be outsourced. It needs to evaluate the cost-benefits and risks of outsourcing each business process. Not every process is suitable for outsourcing.
BPO companies can also be proactive by approaching SMEs with case studies and strategies for outsourcing.
Once the roadmap is ready, take baby-steps and tackle one project at a time, beginning with the simplest or smallest one. This gives the company time to adapt and adopt a gradual learning curve. It will not be too overwhelming if teething problems arise. Once that is implemented successfully, start another.
The roadmap helps ensure that all the projects work well together as each one is implemented. Find a service provider who understands all the elements at play, understands your business model and can advise accordingly. If the provider is unable to supply all the parts, it should be partnered with other companies that can fill in the blanks seamlessly.
“It is important that SMEs choose a company with a good reputation, who are capable of delivering the result that you desire,” said Yeo. “Careful planning is equally important along with maintaining a strong communication channel between both parties, to ensure business growth.”