SMEs: Outsourcing
and innovation

Outsourcing and innovation

According to the Australian Small Business and Family Enterprise Ombudsman, there has been steady improvement in SME performance as a result of innovative behaviour.

Innovative activity refers to any work that introduced, or intended to introduce, an innovation. Large businesses generally have a higher propensity for innovation, most likely as a result of having greater resources available to them. However, offshore outsourcing could potentially give small to medium sized enterprises the edge they need to compete.

Innovation and business performance

According to the Australian Small Business and Family Enterprise Ombudsman, there has been steady improvement in SME performance as a result of innovative behaviour.

30-54% increase in sales

22-39% increase in profitability

9-37% increase in employment

11-33% increase in IT investment

20-31% increase in productivity

Deloitte states that cost reduction, due to outsourcing, is generally expected, though many organisations expect to invest some of those savings, increasing budgets within a particular function, to more broadly advance the business.

According to Chartered Accountants Australia & New Zealand, offshoring activity slowed following the Global Financial Crisis but has since gained momentum as service based organisations move more of their business functions overseas. Australia currently imports $14 billion in business services per annum.

While it was traditionally about cost cutting in distinct back-office functions, offshoring has become far more complex and its use continues to evolve. Many offshored functions are becoming fully integrated into an organisation’s operating model and thus have impacts that extend well beyond the services traded.

A vital aspect in offshoring tasks is the use of online, cloud-based technologies. The ABS presents the following current rate of technology use in business and while there is still room for further adoption, many SMEs are already in a strong position to consider outsourcing as an innovative business strategy.