Firms outsource $2bn services as economy gets tougher
There are indications that more companies are leaning towards outsourcing, as the recession which has hit the Nigerian economy persists.
Industry players say the decline in the economy is forcing more companies to outsource various segments of their businesses in an effort to cut cost.
“A good number of companies, especially those in the oil and gas sector and banks, are engaging outsourcing companies and consultants. Outsourcing companies are providing low cost staff which most companies favour these days,” says Oyewole Tayo, Head, Business Advisory and Investment Services at Michael Stevens Consulting Limited, a Lagos based consultancy.
Outsourcing is a practice used by different companies to reduce costs by transferring portions of work to outside suppliers, rather than completing them internally.
Banks are outsourcing teller and marketing roles, IT functions, as well as facility management roles. Oil companies are also outsourcing facilities management activities, as well as other segments of their operations, including IT, drilling, underground welding and marine engineering activities.
Austin Nweze, President of the Association of Outsourcing Professionals, says “outsourcing holds the key to job creation.” Currently, Nigeria lags behind in the global $500 billion outsourcing business, contributing only $2 billion annually to the industry.
“In 2020 it is expected that outsourcing will create a minimum of 38 million jobs globally, while outsourcing businesses that operate online will create 30 million jobs globally,” says Nweze.
“Nigeria is expected to contribute at least 20 percent to that segment of the industry because of the number of youths in the country,” he adds.
What has happened is that “as profits continue to decline, some companies are combining outsourced staff with their own staff as a cost cutting measure. The companies want to employ more outsourced staff because they are relatively cheaper to maintain says Oyewole.
Another trend that is playing out in the industry is that more companies are engaging management companies which are helping them to re-strategise to move their businesses forward.
Big businesses in Nigeria are “restructuring and realigning their strategies to meet the challenges of the times. That is where the consulting companies come in” says Ije Jidenma, MD/CEO, Leading Edge Consulting
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