Innovation in outsourcing is coming largely from small- to medium-sized companies such as real estate businesses, and can be leveraged as a strategic tool, according to a report by UniSeva released in late July.
“Outsourcing is anything you use outside the four boundary walls of the corporation,” said Ravi Renduchintala, president of UniSeva. UniSeva is a global servicing strategy and business technology firm that enables businesses to innovate, he said.
Renduchintala pointed out that often, people don’t understand the difference between outsourcing and offshoring. Offshoring takes place overseas; it means a company is transferring its job functions overseas to its own facility or subsidiary, he said.
Outsourcing is a different matter. According to UniSeva’s president, the real estate industry itself is a good example of outsourcing.
“From loan organization to loan management to loan servicing, physically one company does not manufacture or service it all. They depend on a number of other players,” Renduchintala said.
Emeryville, Calif.-based HomeGain, is “a classic example” of innovation in outsourcing, Renduchintala said. “Anyone who is buying leads from HomeGain is essentially buying lead capture,” he said.
According to the report, the primary focus of outsourcing for large enterprises is cost efficiency, while for small businesses it’s innovation and risk/reward sharing. While outsourcing relationships for large businesses tend to be formal and hierarchical, with small and medium-sized companies the relationships are community-like and interdependent, the report said.
“Think of services like E-Trade and Schwab,” Renduchintala said. “Those big boys claim to do it all and there is very little opportunity for the small or even medium-sized companies. So in the real estate segment we are already used to it, so why not take it to the next level?”
Usually, large companies outsource contract application development and business processes, UniSeva’s report said, while small- to medium-sized enterprises outsource contract intellectual property development.
Information technology outsourcing and business process outsourcing investments are the fastest-growing technology product and service lines, the report said. Industry analysts predict that by 2008, those services will reach $85 billion, the report said.
Because the growth opportunity in information technology outsourcing and business process outsourcing is substantial, the report said, small and medium-sized enterprises “must innovatively tap into the segment.”
To determine what the scope of a company’s outsourcing should be, the report said, four questions must be asked: “What are the services to be sourced? Where should these services be sourced from? Who owns the service? What is core and what is context?’
Though the outsourcing market has great potential, it’s still a-borning, according to the report, and presently the field is crowded with a strong influx of vendors. “It is unlikely that any clear picture will emerge until 2008,” the report said.
Equinox, HomeGain, LendingTree.com, LowerMyBills.com and various brokers were identified by the report as lead generation/origination mortgage-specific providers of business process outsourcing. Cendant spinoff PHH and Netbank of RBMG are providers in the loan processing arena, the report said.
Dovenmuehle, Cenlar FSB and Wells Fargo are providers in the loan servicing area and Clayton and Lydian Data Services are providers in the secondary market underwriting area, the report said.
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