You may have heard of outsourcing before reading this. Outsourcing has proven to have huge benefits to businesses. It can help them to save time, money, resources, and even make their lives easier.
But what exactly IS outsourcing?
Outsourcing can mean reaching out to a supplier-a vendor, subcontractor or freelancer-to perform a service or supply a good. Here are the top industries that take advantage of outsourcing… and make it work for their organizations:
• IT (60%)
• Legal opinions (67%)
• Banking (40% for Help Desks)
• Insurance and customer service (54%) industries
According to Computer Economics, large companies are spending 7.8% of their IT budgets (small firms are spending 3.7%) on outsourcing with a 42% satisfaction rating. And now that there is cloud computing, outsourcing is only expected to grow in popularity in 2016.
How Outsourcing Can Help Your Business
There are several practical reasons why a business would want to outsource:
• It’s cheaper to have work done by another entity, which has the required training and equipment already rather than spending hard-earned money and resources
• The goods and/or service are delivered faster following your criteria and quality requirements
• Businesses don’t have to worry about hiring and training temporary workers, expand workspaces, and increase overhead expenses.
• For example, IT organizations often see up to 30% savings in overhead expenses by outsourcing.
• Acquiring the right resources to do a job is time-consuming and costly, which can easily be solved by outsourcing.
Outsourcing increases overall productivity and efficiency.
All in all, it makes more business sense because it will increase efficiency-not only as an organization, but allowing you, the business owner or executive to focus and concentrate on expanding your business.
Outsourcing decreases the exposure of your business to risk.
Your teams can continue doing their jobs without interruptions. Additionally, any outsourced projects are handled externally, which means they have no impact on your daily operations, and which also means you won’t suffer from a drop in productivity.
How Outsourcing Can Help Your Business Thrive
Now you know what outsourcing is, and how it can help your business save time and money, now we are going to discuss how it can help your business grow and thrive.
• Focus on your priorities and growing your business rather than managing talent and teams.
• Tap into experts and resources to get a project finishing according to your specifications and deadlines.
• Take control of costs so you can position your business to make other investments
• Open your mind to new ideas, opportunities, and strategies to new ideas and strategies as many outsourcing companies are able to make relevant suggestions on how to improve certain procedures and processes.
• Adapt more quickly to changes in technology, innovation, and globalization.
• Launch a new product on the market faster and without suffering quality.
• Take better care of your customers by executing an efficient response system.
Outsourcing means less stress and less pressure.
Let’s Crunch Some Numbers…
We can talk all day about the benefits of outsourcing, but until you see the numbers, the words mean nothing…
• Data mark Incorporated posted the results of its cost analyses for a single year and multi year performance in 2014. They claimed that outsourcing saved them 31% in a single-year cost analysis, and 33% in a 3-year cost analysis.
• Of the companies that have gone to outsourcing, only 9% have reversed their decision and gone back to in-house resources while 57% increased the jobs they outsourced.
• The remaining 34% made changes in the initial outsource agreement but continued to outsource.
How Outsourcing Impacts your Return on Investment (ROI)
As a growing business, your ROI is measured meticulously by calculating net profit against net worth. As you may know already, ROI is not realized for at least a year to up to 24 months. Fortunately, measuring the ROI of outsourcing does not take as long.
It is important to see outsourcing as an end-to-end process. For example, let’s look at the case of a marketing company in the UK that decided to outsource some work. They based their ROI analysis on several factors:
• Decrease in-house staff hourly rates
• Lower investment in training and managing workers
• Less time spent on meetings
• All-in costs versus internal costs
• Package or bundle costs with outsourcing, which leads to increased savings
One important thing to note is that not all savings and benefits can be measured quantitatively. There are qualitative ROI benefits such as increased competitiveness, reduced in-house conflicts, a boost in innovative thinking, and gains in intellectual property.
If Outsourcing is So Great, then Why Does it Still Have a Negative Stigma?
Some companies have had negative experiences with outsourcing. For example, the most common complaints include:
“Quality is inferior.”
“It’s hard to monitor the progress.”
“The ROI is only in paper.”
Unfortunately, outsourcing doesn’t always work for every business. Some outsourcing organizations and suppliers don’t have proper support or need additional training and resources in order to succeed. But there are things businesses can do to help prevent this.
Here are some tips on how to prevent outsourcing nightmares:
• Conduct an ROI audit. You can first do this ona per-project basis. Then, if you decide to continue, schedule an audit with an outsourcing company at least once a year.
• Request a cost breakdown structure according to project scope.
• Outline all necessary security measures.Include them in a contract or agreement as necessary.
• Require weekly or monthly updates.
How is Outsourcing Expected to Grow?
By the end of 2015, the outsourcing industry will be worth an estimated $25 billion. This is a clear indication of what we can expect to see in 2016, and how many companies are using outsourcing to improve and grow their business.
According to Forbes, there are very few companies that can act independently. Businesses need each other. Outsourcing is designing internally but executing the design phase externally.Think of Apple!
If you want to take advantage of outsourcing, then begin with small tasks such as:
• New product research
• Web and app development
• Event planning
•… And many others