Companies opting to outsource have faced their share of controversy, with critics branding the business strategy a 'killer' of jobs and a brutal by-product of a globalised world where service provision is cheaper in other parts of the world. But Julia Santos, head of global business optimisation for the Johnson & Johnson Group, is not one to shy away from the critics.

A certified outsourcing professional with more than 20 years’ experience, Ms Santos has long been endorsing the business strategy as a crucial lifeline to companies. “Outsourcing is a win-win for everyone,” she says. “It is not a new phenomenon. It has been around since the idea of international trade. Economic history clearly indicates that openness to global markets significantly contributes to a nation’s economic well-being.”

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Key strategy

In addition to her role at the US-based pharmaceutical and consumer packaged goods manufacturer, Ms Santos is also an executive board member at several outsourcing industry associations. “I am very passionate about outsourcing,” she says. “Outsourcing is a business strategy that, if implemented properly, enables companies to obtain a significant business advantage. Outsourcing helps companies ‘stay open for business’.”

It therefore comes as no surprise that Johnson & Johnson has actively embraced outsourcing, making it a key component in the company’s strategy, enabling it to maintain its competitive edge. “One-hundred per cent of Johnson & Johnson products employ outsourcing in one way or another,” says Ms Santos.

“It is important to understand that outsourcing refers to work being done outside of your own company, whether the external partner is domestic or international. Outsourcing allows companies, big or small, to optimise resources. It enables Johnson & Johnson to focus on its core competencies and maintain its cost competitiveness, and benefit from the latest advancements in technology throughout its product cycles.”

People and places

While Ms Santos maintains that outsourcing should be an essential component of a company’s business strategy, she is quick to stress that certain parameters cannot be taken lightly when deciding to outsource. “When we consider outsourcing we look at the business environment,” she says, citing a country's legal framework, regulatory and taxation complexity, and economic and political volatility as key factors for consideration.

With innovation a key component in Johnson & Johnson’s corporate ethos, another criterion that Ms Santos highlights is the quality of human capital. “Labour force availability and a high quality of education are important for innovation. Human capital or an educated workforce is truly the creator of wealth that contributes to a sustainable, quality outcome. The last criterion we consider is financial attractiveness. What good is it being financially attractive if the quality of service is not present?” she adds.

Today’s shifting financial landscape is already having a significant impact on outsourcing trends. While China and India remain popular global outsourcing hubs, Latin America, north Africa and the Middle East are emerging as regional contenders. “As multinationals face difficulties in China or India, companies will be looking to Latin America as an alternative,” says Ms Santos.

“The current hot-spots are in the Latin America region: Brazil, Mexico, Chile, Colombia and Peru have been seeing tremendous growth in outsourcing. Other rapidly emerging hubs will include the Philippines, Vietnam and Malaysia. Nearshoring will benefit many companies looking to spend less on travel costs, be more efficient by capitalising on timezone compatibility, and harness on closer cultural affinity.”