Corporate Virtualization: A global study of cost externalization and its implications on profitability

Corporate virtualization

A tool kit for enhancing and delivering long term shareholder value


The nature of what a ‘company’ is has changed dramatically. 25 years ago what was a labor cost is now a supplier invoice.

Our study shows that 70% of the average company's revenue is now spent with third parties, compared to only 12.5% spent on labor costs.  In short, supplier relationships help define the modern company. And smarter management of the cost base can significantly improve business performance.

As our study suggests, management that neglects the strategic aspects of their supplier base, or fails to maximize its value, risks missing out on developing competitive advantage and delivering long term shareholder value.

   

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"Business leaders need to move away from the 'lazer-like' focus on cost savings & instead focus on value for money" 

“business leaders need to adjust their perceptions of procurement, moving away from the ‘lazer-like’ focus on cost savings and instead focusing on value for money”

Outsourcing labor continues, poses risks for some 


"Companies continue to reduce in-house staff & spend less on direct labor costs - a trend that poses potential risks for some firms"

thesundaytimes
"Instead of reaching for the axe, companies should look to eliminate costs elsewhere"

 

 

Harvard-business-review

"Leaders should treat procurement as a driving force for innovation and view it as critical partners in the company’s success"

Global businesses are 'hollow'

Businesses around the world have been on a journey, whether deliberate or not, of cost externalization.  The majority of any business’ revenues are now spent outside the organization. What was once a pay slip, is now a supplier invoice.  

The larger role that suppliers play has turned organizations into a complex network of stakeholders and suppliers.  However, the truth is that management practice has not kept pace with this externalization of cost.  And the implications of this go to the heart of business and operational management.

Aligning these thousands of suppliers, your internal stakeholders and the resulting the cost base with corporate aims can improve business performance significantly, in terms of profitability, productivity, risk management, innovation and intellectual property.

Management that neglects the strategic aspects of their supplier base, or fails to maximize its value, risks missing out on developing competitive advantage and significant source of long term shareholder value.
 
Register (using the form above) to access the full research report and receive:

  • In-depth analysis of the nearly 2,000 global business' cost structures
  • The implications of externalization
  • Suggestions for how to manage your supplier cost base in the 21st century

Proxima infographic of global study on cost externalization