Outsourcing has kept SMEs In Survival Amidst Covid-19:KEPSA

The Covid-19 pandemic caught the global economy by surprise forcing every sector into a quick restructuring. Those that restructured survived while those that didn’t adapt to the new ways of doing things shut down. 

Small and Medium Enterprises were highly affected by the pandemic when it first struck and most of  them had to find new ways to make rapid adjustments in the way they delivered services and interacted with customers in order to comply with the measures to restrict social interaction.

These changes included service businesses taking their businesses online and goods based businesses investing in last-mile delivery infrastructure to reach their housebound clients.

As a result, remote working and service outsourcing have become popular, providing new opportunities for the information, communication, and technology (ICT) and logistics industries. They’ve been among the most active in establishing new startup prospects in the last 15 months.

ICT professionals and logistics personnel are the most sought after by SMEs since Covid

A survey conducted by Kenya Private Sector Alliance (Kepsa), ICT professionals and logistics personnel are the most sought after by SMEs since the emergence of the virus.

The survey was conducted in collaboration with the Ajira Digital Programme, a joint project of Kenya’s ministries of ICT, Innovation and Youth Affairs, Public Service and Gender, Education, and Foreign Affairs that teaches young Kenyans digital skills and connects them to online jobs. With a response rate of 79 percent, the poll targeted 322 small companies in 29 counties.

Prime Reasons to outsource 

“The prime reasons to outsource are a lack of internal competencies, focus on core business, lower costs, and greater flexibility. It is also undertaken to accelerate a business change (business restructuring) due to their status of keeping fixed costs (of staff/technology) lower and controlling the risk of goods or services availability on time and budget.” Kepsa.

The Surveys’ Key Notes 

Outsourcing is driven by a need to boost efficiency for 24 percent of the organizations surveyed, followed by a lack of capacity for specific tasks for 20 percent, and a desire to minimize costs for 17 percent.

Logistics is still the most outsourced function among the organizations surveyed, accounting for 65.5 percent, followed by branding employees (64.8 percent), and information technology (64.8 percent) (61.3 percent).

Thousands of employees, particularly those working in services that require little face-to-face interaction, continue to work from home, putting a strain on teleconferencing platforms and Internet connections.

Businesses have since established or strengthened remote working platforms, increasing the demand for ICT support services. Firms, on the other hand, highlighted security and confidentiality of information as important hurdles in outsourcing ICT services, as well as pricing.

Business areas benefiting the most from automation 

Source: KEPSA

Low budgets for office deliveries and messengers, according to Kepsa, are due to a variety of issues, including low demand and poor service quality.

The low budget for outsourcing confirms that these services are either offered on a limited scale, providers are underpaid, or they are not given to the levels expected, resulting in enterprises simply paying modest expenses.

Overall, 44.4 percent of businesses questioned indicated they outsource services for less than Sh50,000 per month, with 8.7 percent paying between Sh50 000 and Sh100,000 per month.

Only 1.4 percent of respondents indicated they spend between Sh500,000 and Sh1 million on outsourcing services every month, while 1.1 percent said they spend more than Sh1 million.

However, according to Kepsa, the number of enterprises outsourcing remains low as a fraction of overall SMEs in Kenya, indicating that this line of business has a lot of room for growth in the future.