Outsourcing has come a long way in the past couple of decades. From a time when most people associated the concept with call centres, we now live in a business world where the variety of functions that can be outsourced are endless. Already valued at $232 billion in 2020, the global outsourcing market was expected to register a compound annual growth rate of 8.5% from 2021 to 2028 and there is no doubt Australian businesses have been won over by the chance to improve efficiencies and save money by handing certain tasks to external providers.
Like everything in life though, there is another side and that is the fact that not every business gets outsourcing right. Just as endless organisations have had huge outsourcing wins, there are those that have failed to realise its true benefits or been burned by the experience. There is no doubt outsourcing has the power to improve or even transform business processes and balance sheets but, like any decision, it requires an investment in time and research to ensure the best chance of success.
Whether you are diving into the outsourcing pool for the first time or keen to make changes to your current arrangements to avoid becoming a failure story, these are a few top tips to consider when developing your outsourcing strategy.
Don’t rush in
With so many stories of companies reaping the rewards of outsourcing, it is little wonder some newcomers rush to embrace the practice but you really need to weigh up if it is the best option for your individual situation. Outsourcing is not a silver bullet for your business woes – it is a strategic decision that requires analysis, research and considerable thought. Take the time to consider your true motivations for adopting outsourcing and avoid becoming another cautionary tale.
Identify what can be outsourced
While many people know customer service and IT help desks can be outsourced, there are countless business processes that can be handled by third parties. From accounting and bookkeeping to digital marketing and administrative services, explore the wide variety of processes, functions and even departments that can be outsourced to determine which are the best options for your own business to pass on to a third party.
Just as businesses typically recruit new staff with long-term goals in mind, building strong and sustainable relationships with outsourcing partners should be top of mind. Working with the same provider for a long period of time allows them to become familiar with your company and processes, which in turn helps them become an even more valuable part of your team.
Target the right people
The incredible growth of the outsourcing sector means there are literally thousands of providers ready and waiting to support your business. Make sure you partner with the right one by taking the time to find the people and teams best suited for your organisation. From skill sets and experience to geographic location, the success of your outsourcing strategy can live and die on linking the right people at the right time.
Don’t be afraid to outsource early
It is a common misconception that the only time to start outsourcing is once your business has grown significantly. On the contrary, outsourcing can be a critical tool for helping gain momentum at the start of a business’s life or even get an initial concept off the ground. Outsourcing early can drive early growth and allow entrepreneurs to take their organisations to the next level.
Recruit in-house champions
While task outsourcing is undoubtedly smart business, the concept can be difficult for some staff members to initially negotiate. That is why it is a huge benefit to identify key players within your organisation who can be voices of support. Many outsourcing ventures have stumbled, if not failed, because in-house teams have not embraced the concept and getting people onboard is an important step to getting outsourcing right.
What to outsource
With our top tips at the top of mind, it is now time to consider what tasks can be outsourced and the reality is you can outsource nearly any type of role as long as it does not require localised knowledge or a physical presence onshore. If you have systems and processes in place and the role can be done remotely/virtually, it can be outsourced and you can get highly skilled workers at a fraction of the price you would have to pay their onshore counterparts. Some of the most in-demand business tasks ideally suited to outsourcing include:
- Administration: the never-ending innovation of technology, faster internet and connectivity speeds and boom in cloud services has created the perfect environment for administrative outsourcing. Studies have found that employees at large-sized companies only spend 45% of their time on primary job duties, with up to 40% of their workdays ‘wasted’ on the likes of administrative tasks, meetings and ‘interruptions’. Now imagine the benefits to be gained if much of those admin tasks were outsourced to an expert provider that charges far less for their time than you charge for yours. Data entry, payment processing and calendar management are just a few of the administrative tasks waiting to be tackled by outsourcing providers.
- Bookkeeping/Accounting: while the presence of an in-house financial wizard would be great in a perfect world, the reality is they are a very costly resource in this one. Fortunately, functions such as bookkeeping, invoicing, financial reporting and accounts payable and receivable are increasingly being outsourced thanks to advancements in technology. Cloud-based accounting software such as Xero has made sharing of documents and data easier and more secure than ever, with quality outsourcing providers boasting a wealth of talented and highly efficient employees and teams capable of saving companies considerable time and money in the field of managing money.
- Technology/IT: no matter how tech savvy you may be, the simple fact is it is often far more efficient and cost-effective to assign IT responsibilities to a third-party expert. Learning how to code an app, migrate to the cloud or finetune a website is just not worth the time and expense when there is an abundance of talented people ready and waiting to deliver at a fraction of the cost. Outsourcing providers are also highly proficient at developing and deploying strong cybersecurity measures to ease the risk and burden associated with hackers and cyber criminals.
- Human Resources/Recruitment: every time you recruit a new staff member, there is an increase in your human resource obligations and failing to adequately address them can prove costly in the long-term. By outsourcing tasks such as recruitment, payroll and performance management to experts in the field, you are guaranteed to not only avoid the financial toll of doing so in-house but also ensure you have more time to dedicate to your specific areas of expertise.
- Digital Marketing: there has never been a greater need to develop a comprehensive digital marketing strategy and that is set to only grow in coming years. Rather than spend your days (and nights) trying to navigate what is a highly complex and technical field, outsourcing providers can tap into a pool of skilled marketing staff that not only live and breathe the subject but are paid far less than their in-house counterparts. From developing quality written content and email campaigns to social media marketing and search engine optimisation, outsourcing provides companies with a golden opportunity to improve results at the same time as saving costs.
While the array of tasks that can be outsourced continues to soar, businesses need to be mindful of rushing to hand certain responsibilities to external parties.
- Company culture: handing the enhancement of company culture to a third party is a short-cut that should not be taken. The people within an organisation know it best and are the ones who should be responsible for exploring and working to improve that intangible force that can go a long way to ensuring not only a happy workplace but a successful one.
- Termination: letting a staff member go is never an easy or enjoyable task but that does not mean it should be tasked to an outsider. While it is acceptable to seek advice or guidance from external operators, avoiding the difficult conversations yourself runs the risk of causing a loss of respect from both the terminated and the colleagues that remain, which can erode the all-important company culture mentioned above.
- Core competencies: as previously mentioned, successful businesses not only know what they do best but pride themselves on doing it. Keeping one’s core competencies in-house is a must and while it is acceptable to seek external support when needed, do not risk devaluing the very thing that defines your business.
To outsource or not
Outsourcing is not a one-size-fits-all option. Developing and deploying a successful outsourcing strategy takes time, commitment and effort, with organisations needing to be mindful of what makes them unique, the tasks best suited to third-party support and the steps they should follow to make their outsourcing journey a successful one. It should not be undertaken lightly but when done well can deliver huge rewards.
If you are considering outsourcing, this Outsourcing Tool Kit covers everything you need to know about the business strategy including how to choose the right provider, the questions you need to ask them, how to introduce outsourcing to your current team and an example of a successful outsourced business model.