Delegating or outsourcing is an essential part of small and medium size businesses because of its potential for growth and cutting costs.
Historically, outsourcing remained a key component of large firms, such as Fortune 500 companies. Today, any sized business can outsource tasks quickly and efficiently.
These are critical decisions business leaders have to make due to competition, as outsourcing is viewed as a competitive advantage.
Read on to find out more about outsourcing, how to get started outsourcing, and weighing the pros and cons.
Over time, various terms describe outsourcing, such as business process outsourcing or BPO. Offshore outsourcing is also a well-known term, as most outsourcing is conducted overseas.
Business process outsourcing means subcontracting business operations to a third-party. Initially, manufacturing companies outsourced their products or supply chain, but now outsourcing pertains to IT and other services.
Simply put, a person outside of the company does work for you on your behalf.
Offsourcing is more crucial than ever as businesses and services rapidly grow, with more consumers’ demands for more timely operations and efficiency.
For instance, 24/7 customer service, receiving goods in a matter of days instead of weeks, or troubleshooting instantly with the click of a button on a service website—all give business leaders a competitive advantage.
As a result, top business managers delegate specific tasks to reduce workflow, with firms requesting contractors to handle back-office or non-core functions.
Since the 80s, outsourcing was a strategic component for large companies. However, with the introduction of cloud computing and rapidly growing technology software and services, most SMBs can outsource, making it an essential part of their business.
Interestingly enough, outsourcing is a relatively new process that began in the 1970s, with manufacturing companies using offshore services for their goods. By the 80s, it made a name for itself thanks to delegating tasks, solidifying the process as a business strategy.
Ultimately, BPOs became popular in the 90s as business leaders realized how much they could save by offshoring.
Outsourcing continues to grow as a global industry because it helps businesses improve their customer service, grow revenue, and increase their bottom line. Some benefits include:
As of 2019, outsourcing is part of businesses worldwide, generating $92.5 billion in USD. Out of that 92.5 billion, about $66.5 billion went to information technology outsourcing (ITO) and 26 billion to business process outsourcing.
Source: Statista, Nov 2020
Every year, outsourcing advantages become more transparent, especially with the most prominent companies using outsourcing as a tool to gain a competitive edge by reducing costs, efficient workflow, and faster response time.
Other global business leaders with heavy resources in outsourcing concluded that cost reduction was their best reason to outsource and reaped those benefits.
Source: Deloitte Global Outsourcing Survey 2020
Other pros and cons include:
Pros:
Cons:
In particular, outsourcing has been in the midst of controversy, specifically in the United States. For instance, the “End Outsourcing Act” first made the scene in 2017 to incentivize companies to keep jobs in the United States and effectively punish those who outsource by making changes to the tax code.
The legislation gained more support in 2020 and was reintroduced in the Senate. However, it has not made any advances, and it is unclear if it will become law if ever passed by Congress.
Overall, the pros outweigh the cons, and outsourcing is here to stay and will continue to be advantageous for SMBs in the long run.
Some business leaders may not know if outsourcing is right for them and if they should outsource. However, advantages such as reducing costs, further enabling expansion and longevity in the industry are just a few attractive benefits to outsourcing.
Consider the following questions when assessing your business:
More than likely, if it can be done online, it can be outsourced. For instance, many businesses use outsourcing to control their social media, which is part of marketing. Hiring someone to post daily and interact with customers can change your customer service and engagement for the better.
Overall, there are roughly 10 different functions that small business can outsource:
Gathering research and data also can be challenging, including data entry, which are popular aspects that are outsourced.
Whichever function you choose to outsource may come with advantages for helping the company and employees.
Choosing the right individual or agency to conduct your business with is critical to saving time and money. Think about different aspects, such as location and opportunity costs, as you select your outsource partner.
Other questions business leaders should ask themselves include:
Consider taking the vetting process as seriously as you can, as outsourcing will play a massive role in your productivity. Any disruptions in the workflow may hinder your progress and cost your company.
Also, finding an organization to help connect you with the right individual or firm lies in their expertise and understanding of the outsourcing process.
Most importantly, make sure the agency or person aligns with your company’s values, strategically and ethically.
Let’s look at three examples of outsourcing to get a more detailed look at the industry and how it benefits other companies.
Example 1:
One of the largest areas to outsource work is the Philippines, which is right behind India.
A company called Teleperformance employs over 23,000 people who work on behalf of companies from around the world.
In this video, the center of hundreds of employees working at their computers is evident, using headsets to communicate with customers daily. If you were to hire through an agency, this is the type of environment where they fulfill their tasks.
Example 2:
Outsourcing your talent acquisitions may also seem like a daunting task, as business leaders may feel they don’t have enough control to keep team dynamics. However, outsourcing to find the right people for your company may be advantageous.
Throughout the discussion, various examples show that outsourcing talent worked and continues to grow, known as the recruitment outsourcing process (RPO).
Example 3:
ADP is an American company that provides outsourcing needs to other businesses, including onshore and overseas. In this example, ADP goes over their process and helps an overseas client with onshore operations, providing them with their HR and payroll needs.
The client, Rémy Cointreau, states that outsourcing their payroll and HR allows them to work more strategically and worry less about administrative tasks.
Outsourcing is easy, but creating an outsourcing plan is more challenging. That’s why we implement our step-by-step guide, known as the DCX 4D™ Process.
You need a company that has experience outsourcing to meet your small or medium-sized business requirements. At DCX, we will find the contractors that will blend into your company’s standards and reduce your workload, providing better productivity.
Business process outsourcing, or BPO, is most popular for cutting costs, which are excellent for SMBs. Before, offshoring was only available for larger companies with lots of capital. Today, small to midsize business owners have the opportunity to cut costs, expand their business, and meet customer demands.
Let’s help you increase productivity to save time and money by connecting you with your outsourcing needs. Contact us today!
If you are still unsure about pursuing outsourcing, here are a few frequently asked questions:
We will provide a questionnaire for you to fill out. From there, we will create a job description, post the job, schedule interviews with you, and ultimately hire the person that fits the best.
Of course, you can be as involved as you like, from reviewing resumes to traveling to the Philippines.
Most of the team is highly proficient in English, with a moderate accent. Each candidate has a different English level, and we will ensure we test each person and provide you with English test results for your chosen candidate.
They can begin working whenever you like, as many are available right away. The candidates also work around your schedule, which is clear from the beginning through the selection process. From there, they can work day shifts or night shifts.
We also have these concerns and ensure these candidates are paid at market rates with incentives. Also, we make it clear about schedules, company values, expectations, and more.
Many tasks can be outsourced, freeing up time for you to concentrate on where you or your company excels. For instance, data entry, sending out emails, customer service, accounting, or small tasks are great jobs to outsource. Also, outsourcing less essential tasks can reduce the possibility of burnout.
Anything you like, as long as there are set guidelines and expectations are clear. The most common tasks are data entry, customer service, research, quality control analyst, HR, etc.
If you’re still questioning whether offshoring is right for you, contact us to assist you further.