With a market value of $245.91 billion in 2021, Grand View Research expects the global business process outsourcing (BPO) industry to reach the $435.89 billion mark by 2028, with a compound annual growth rate (CAGR) of 8.5% during the forecast period. Whether it be a result of the current global labour shortage, a re-evaluation of resources or general interest in the benefits of an outsourced team, these figures themselves are enough to illustrate how many businesses are embracing the offshore/outsourcing trend.
In this blog, we provide an overview of what outsourcing is and the advantages or benefits businesses are experiencing when hiring outsourced teams.
What is outsourcing?
Outsourcing is a strategy that involves hiring a team member outside of your business who is usually 100% dedicated to supporting your local team in whatever capacity they require. The terms outsourcing and offshoring are often used interchangeably. While outsourcing means hiring a team member(s) outside of your business anywhere in the world, offshoring means hiring a team member(s) overseas specifically.
Like many business solutions, outsourcing has different models and what may work for one business won’t necessarily fit another. That is why it is important to ensure you choose the right outsourcing provider and really dive into the nitty-gritty aspects of their operations to meet your needs and support your business goals.
To keep things simple, we will detail the most common models of outsourcing to help you understand the key differences:
- Traditional outsourcing: The most well-known model of outsourcing. This is where a provider assumes full accountability for delivering tasks, functions or services outsourced.
- Staff leasing: This model allows businesses to retain responsibility for who gets hired and how staff are managed daily. The outsourcing provider places these staff on their own payroll and provides the business with the necessary infrastructure and technology to ensure their outsourced staff can work efficiently.
- Captive setup assistance: Instead of outsourcing to a third-party, businesses may use a consulting service to set up their own outsourced entity in a chosen location (locally or overseas). This can also be referred to as ‘shared services’.
- Staff augmentation: This involves an outsourcing company providing their own staff on a ‘hire’ basis to help businesses during peak work periods or when they need someone to start ASAP and don’t have the resources or time to recruit themselves.
- Project-based outsourcing: Instead of an ongoing outsourcing agreement, this would occur when a company outsources functions relating to an entire project for delivery.
- Build-Operate-Transfer (BOT): The explanation is in the name. The outsourcing company builds an outsourced team, sets them up to ensure they operate efficiently, then transfers outsourced operations to the business or client.
Now that you have a general idea of what outsourcing is, you’re probably wondering: ‘what’s in it for me?” or “why would I consider investing in an outsourced team?”
What are the advantages or benefits of outsourcing?
Operating in a global economy requires business owners to look towards improving efficiencies and delivering cost savings. Whether it be the issue of struggling to scale and grow, or wages increasing due to economic changes, business owners are seeking to invest in strategies that will enable them to grow sustainably. Strategies such as outsourcing.
Here are some of the primary advantages of outsourcing:
For many business owners, there aren’t enough hours in the day. The reality is if they want to grow their business, they need to increase their staffing. However, labour costs can be high, and there are also hidden costs. More employees may also mean the need for a bigger office space, more IT equipment and other associated overheads. Even if you consider remote work, there may still be a need to invest in data security measures or provide technology to facilitate a work-from-home model. These additional staffing costs can be crippling and quickly outweigh the increased sales or revenue that having additional employees may generate.
Offshoring allows additional work to be completed, at significantly reduced costs, especially when outsourcing to a lower cost economy, such as the Philippines, where employment costs are up to 70% less.
An example of cost-savings involves an accountancy firm that wanted to provide high-quality services for their customers at an affordable price. They had previously tried to set this business model up in Australia using local staff but couldn’t achieve the same results with the capital and labour costs associated with employing staff locally. In 2014, they hired two offshore accountants to kick-start their business. As of 2021, their offshore team has grown to 11. The results? Their local staff have been able to focus more on the high-value services for clients. This has not only saved them time but increased profits. They have also achieved their goal of providing an affordable solution for their customers due to lower overheads.
Scalability and business growth opportunities
Most businesses have peak periods where there is too much work and then times when there isn’t as much. Outsourcing provides scalability during these peak times. A company may invest in several offshore employees to cover a particularly busy period. Once the peak has passed, they can quickly reduce their offshore staffing, which means they aren’t carrying the employment costs during quieter periods. There is often a very short lead time to hiring offshore, providing a further advantage in that it can be very quick to scale up a business, depending on the role type.
Take one of our clients as an example. They achieved a 375% increase in new business over three years. During this time, they also grew their offshore team from two to 16. Integrating an onshore and offshore team allowed them to focus their time on innovation and thought leadership without being bogged down by day-to-day tasks. It also provided more time to create robust strategies for nurturing and building client relationships.
24/7 availability and flexibility
Having employees located in different time zones provides opportunities for businesses that may not have previously been available. It means that work can be completed faster by taking advantage of time zone differences. This is also known as ‘following the sun’ and presents exciting opportunities for vastly improving customer service. Offshoring allows employees to be rostered across different time zones. If a customer messages the organisation, a customer service advisor is waiting to respond immediately, regardless of the time zone the enquiry comes from.
For example, a small tech startup company experienced exponential growth and required additional resources to help support its existing client base, and fast. So they hired an offshore systems administrator to take care of the day-to-day customer interactions. Which allowed them to maintain excellent customer support metrics. The offshore team member achieved a 53-minute first response median on support tickets, compared to the 18.3 hours benchmark for IT services businesses with 1-9 employees. Hiring this outsourced team member became a cost-effective resourcing strategy that helped support an existing customer base and freed up valuable time for nurturing partnership and business growth.
Greater staff satisfaction and morale
Outsourcing experts help you identify roles that would be best suited to send to an offshore employee. That way, your local team can focus on what they do best and what motivates them, leading to productivity improvements across the board. You’ll also relieve any unnecessary stress in your local team by providing additional support. Your staff will appreciate this, job satisfaction will increase and attrition will decrease thanks to outsourcing.
Take this example of a medium-sized professional services organisation working across several industry verticals who wanted to scale the growth of their business with improved efficiencies, a better lead generation engine and enhanced conversion rates. They kept strategy, content development and project management onshore and outsourced all implementation functions offshore.
With this ‘blended marketing’ team and the ability to focus their marketing and use their resources more effectively, this organisation achieved a 100% inbound marketing strategy, no longer needing to rely on outbound sales initiatives. They also experienced a 104% increase in lead generation over 12 months after implementing a content-led strategy via their new blended team.
Access to a greater talent pool and expert advice
Having a more global approach to hiring can open up a talent pool that previously wasn’t available. It allows businesses to hire people with diverse backgrounds, experience and education. This larger pool gives organisations the best opportunity to find the right people to help take a business to the next level.
This website development company wanted to scale and grow their tech company quickly and cost-effectively to meet the growing demands of an increasing customer base. Since engaging with outsourcing, they have expanded their team to include a WordPress team leader, senior web developer, WordPress and UX/UI designers and executive assistants with marketing skills. Due to the specialist nature of these roles and how high in demand they are, it can be difficult to source locally, but offshoring allowed the company access to a greater talent pool.
Was it worth it? Since implementing an offshore team, the company has seen a 72% increase in customer acquisition. The offshore team has also improved design turnaround times, leading to a vastly improved customer experience and providing capacity for the organisation to take on more work.
Discover success stories and see these advantages in action
Want to discover more information on the advantages and benefits different companies from various industries experienced through outsourcing? Outsourcing success - a collection of case studies, showcases 12 real-life client success stories to demonstrate how outsourcing became the solution to overcoming their own unique business challenges.