Fintech for Life

Why does the USA outsource more?

Written by CONVEM | Sep 12, 2024 12:00:06 AM

The decision to outsource operations in fintech is heavily influenced by the business culture of each country, shaped by historical and economic factors.

In Brazil, there is a strong tendency to keep operations in-house, based on the belief that internal management offers greater security and predictability, minimizing dependence on external suppliers.

This approach has its roots in the country's historical economic instability, combined with protectionist policies that kept Brazil relatively closed to international trade for much of the 20th century.

The import substitution industrialization model fostered the vertical integration of companies, encouraging internal production as a way to ensure control and self-sufficiency.

Moreover, the lack of robust financial education in the country can lead to misguided investment decisions, with outsourcing mistakenly perceived as an additional cost rather than a strategic opportunity for cost reduction and increased efficiency.

However, this mindset can result in higher costs, greater exposure to financial, regulatory, and reputational risks, as well as a slower time-to-market.

Conversely, in countries like the United States and various regions of Europe, outsourcing is seen as an essential strategic tool to focus on the core business, valuing specialization and operational efficiency.

The pragmatism of these markets promotes outsourcing of all activities that are not the business's competitive differentiators, allowing companies to focus their resources on more strategic and innovative areas while ensuring compliance and security.

In the United States, for example, where economic freedom is highly valued, the business culture drives a management style focused on innovation and outsourcing as ways to achieve sustainable efficiency and growth.

Examples of outsourcing include:

  • Automotive Sector: Companies like Ford, GM, and other global industries prioritize technology and assembly, outsourcing component manufacturing.
  • Nike: Known as "the company without a factory," it outsources all its production to maintain a focus on innovation and product development.
  • Management Models: Leaders like Jack Welch (GE) and Sam Walton (Walmart) are references in adopting outsourcing practices to achieve efficiency.
  • Financial Sector: Banks like BBVA, Deutsche Bank, JP Morgan, HSBC, Santander, Citibank, and Wells Fargo outsource operations, transaction processing, and regulatory activities, allowing them to focus on the core business and optimize processes.

Ultimately, the decision to outsource or not depends on various factors, including company strategy, market conditions, and cultural context. While there is no one-size-fits-all answer, understanding why certain markets, like the United States, favor outsourcing can provide valuable insights for companies navigating the complex world of global business.