The magazine "Expert"
In southern regions, as the number of small and medium-size companies grows, the number of outsourcers also grows.
In southern regions, as the number of small and medium-size companies grows, the number of outsourcers also grows. According to forecasts, the growth of that number will further accelerate. This process was spurred up by the crisis of 2008 and 2009 and now the forming of a new model of market relations is becoming evident.
In Russia, the number of outsourcing companies grows stably. Those companies and analysts name the events of 2008 and 2009 as the principal reason of their growth. At that time, thousands of lawyers, accountants, programmers and personnel administrators lost their jobs and became entrepreneurs. Outsourcers, estimating the changes that occurred over the past two years, talk of 30% or, in certain spheres, even 50% growth. However, experts say, there are no exact figures just yet. Certain tendencies as to the growth of the outsourcing market were revealed after 2009 when the Expert RA rating agency began publishing its ratings of outsourcers doing accounting. "Well, there are over three million small and medium-size outsourcing companies, – says Sergei Tiunov, general director of the BDO outsourcing division. – Many of them cater to entrepreneurs. According to our estimates, the outsourcing sector grows by 15% to 20% annually, and that growth should further accelerate". Many participants of the segment are certain that the deep integration of outsourcing in economy should make both large and small companies far more efficient
The Promising Field
According to the estimates quoted by Sergei Tiunov, up to 40% of the country's GDP is generated by small and medium-size companies. At the same time, now, the growth of outsourcing is behind that of small and medium-size business. Vera Laisan, director of the Kettari Staff company, wrote, "The outsourcing of functions other than principal activities is a relatively new way of improving the efficiency of companies. In Russia, its beginning dates to about 14 years back when some Western companies working in Russia, accustomed to using external providers, were the first consumers of such services". At this time, in the Southern and North Caucasian federal districts, demand for outsourcing is mostly formed by either foreigners or large capital city companies. Yet because the South of Russia is ahead of other regions where the development of small and medium-size business is concerned, a large pool of outsourcers working with smaller companies is forming. This makes outsourcing a sort of an indicator of the activeness of small business in regions.
"This is a direct dependency, – says Natalia Romanenko, director of the Accounting Bureau company. The number of outsourcing companies, which increased by about 30% in Krasnodar alone, over the past two years, is an indicator of the condition of the segment as a whole. Besides, it is important to note that entering this niche is very promising for entrepreneurs". According to the estimate made by Andrei Chekhov, a member of the State Bar Association of the Krasnodar Territory, the number of legal outsourcers increased by no less than 50% over the same period. Alexander Otrokhov, deputy executive director of the Guarantee Foundation for the Support of Small Business of the Krasnodar Territory, believes that outsourcing is now among the spheres most interesting for small and medium-size entrepreneurs. "The sphere of business services, – he says, – now has not enough participants. That is where entrepreneurs should go to looking for a great demand and growth potential".
Points of Demand
According to Vera Laisan, the number of companies prepared to pass some of their functions, other than their principal activities, to outside service providers increases annually. This tendency is especially evident in highly competitive spheres of economy. For instance, speaking of large companies, outsourcing is in high demand among construction, retail, manufacturing companies and even among governmental organizations. The most often outsourced activities are informational technologies, legal services, accounting and auditing, purchasing, advertising and, lately, also cleaning and catering. Marzet Geduadzhe, a deputy general director of the Aspecta legal company, says that laboratory and other research are also increasingly often outsourced, various environmental research being in high demand.
Vera Laisan adds that personnel search and management costs have been optimized. For instance, over the past year, regional companies required various temporary personnel, such as warehouse employees, administrators, etc. "Looking at the tendencies, – says Tatiana Skobeleva, director of the Rost-Expert-Audit, Ltd., – I believe that in like three years every company will have outsourced all its non-principal activities. Abroad, that is the only way people work and we are moving in the same direction. It is not that large players need small outsourcers. Small and medium-sized companies have no other way to go either. Taxes are so high that the number of employees simply must be cut. Anyone who understands business comes to outsourcing.
Market Optimization
"Smaller companies often assist large ones in some or other way, – says Irina Veretennikova, director, development, of the Southern region of the HeadHunter company, – so that the growth of the outsourcing market plays a positive role in the development of small and medium-size companies. In the modern world, competition is too hard for small and medium-size companies to pose any threat to giants producing the same goods and services. Cooperation is far more efficient than rivalry, so it is good for smaller companies to do what is non-primary activities for their clients. As experts believe, this mode of cooperation enhances the efficiency of business as a whole.
The key factor of the development of outsourcing is exactly the redistribution of money inside the market. It brings considerable savings and leads to the healthy diversification of economy. "This is so obvious, – says Marzet Geduadzhe, that I am surprised everyone does not do it this way. Of course, very often, a company can afford in-house lawyers but outsourced legal services cost just 5 to 10 thousand rubles monthly. The amount depends on the size of the company but whatever it is, outsourcing comes three to five times cheaper".
Speaking about saving on accounting, Vera Laisan gives the following example: "For instance, a company with 100 employees pays its chief accountant between 30 thousand and 50 thousand rubles monthly. Add taxes, the cost of the workstation, training, etc. In the meantime, if accounting is outsourced, the company pays just about 25 thousand rubles monthly". Mrs. Laisan says that a correctly written agreement with an outsourcing company will guarantee good results and uninterrupted service for time and a half less money.
Adding together the cost of auditing, accounting, cooperation with supervisory agencies, etc., Tatiana Skobeleva says that the total savings here will come to at least 30% to 40%.
Live through the Survival Period
Sergei Tiunov is more careful in his forecasts, believing that considerable demand for caterers to business may appear only as business itself develops, that is, after the completion of all stages of business formation and the shift of priorities from survival to raising efficiency. So three years seem to be too short a time for changes on that kind of scale.
Outsourcers themselves, even while noting the great potential of this segment, admit that this market is very non-homogeneous. First, there is a number of rather saturated sub-segments, such as auditing and accounting, purchasing and legal services. Victoria Lupinskaya, commercial director of the Migris company, a Krasnodar-based purchaser says competition there is rather hard and one needs a good reputation to join the market. Natalia Romanenko agrees by saying, "Perhaps, this is exactly the case when advertising and promotion do not mean much. In this business, reputation is everything". Therefore, starting from scratch, without experience and a minimal client base, one may never even notice the high potential.
Besides, according to Victoria Lupinskaya, in regions, outsourcing develops slower than one could wish. Demand is generated by Moscow and foreign players. "It is because outsourcers are rated wrong by local companies, – she continues. Many small companies have come to understand the advantages of external service providers. In the meantime, large regional companies often do not care how much they spend. We constantly cooperate with Moscow and St. Petersburg construction companies, which are very potent. Yet they do not want to spend too much and, ultimately, their savings come to about 50%".
However, Alexander Osin, chief economist of the FINAM Management company does not believe that the market of outsourcing does not grow fast enough because it is slowed down by just entrepreneurs' lack of understanding of all its advantages. He says, "Passing the traditional non-key functions of companies, such as accounting or advertising, to external service providers is for rich small and medium-size entrepreneurs and for small companies with relatively "clean" financial reporting. In Russia, the services of outsourcers are not cheap and that depends on demand on the part of relatively highly profitable intermediary companies that prevail among medium and small ones. This situation curbs demand for outsourcing among manufacturing small and medium-size companies and prevents the market from developing organically".
Weighing all the pros and contras of outsourcing, Sergei Tiunov says that ultimately individual approach is important for each company. "If a company's own resources are sufficient to cover all its needs, – Mr. Tiunov says – and the company takes care of itself more efficiently than an external service provider could, then outsourcing may not be necessary. However, even ideal situations may be threatened by human factor. Employees may become sick, go on vacations or quit, which, as a rule, escapes planning. The smaller the company, the better off it is not creating partially producing jobs and, instead, employing an outsourcer who will be paid only for things actually done. Our experiences show that the most success is attained by companies totally excluding non-key operations. Outsourcing is a combination of two good old principles: sticking with narrow specialization and concentrating on what one does best. Many companies in economically developed countries have long since switched to this mode of operation. Its development in Russia is just a matter of time".
