The effects of outsourcing your business
Outsourcing is becoming a popular topic these days, like digital marketing, bitcoin mining, social engineering, Mars colonization… where was I? Oh, outsourcing! The term is mainly associated with the IT industry (but many more industries practice this strategy) and becomes more and more demanding nowadays. Although its efficiency in terms of management is yet to be researched, outsourcing is well-known to be a positive work strategy.
Here at HiTech, we have had a profound experience with outsourcing and dealing with different kinds of projects; if it is either medical application development or an ICO support team, we know how to manage it successfully.
Back to the topic, outsourcing is a strategy, or a tool if you wish, that can help businesses accomplish a set of tasks. Companies benefit from outsourcing by rearranging their management team. So before anyone decides whether to outsource or not, they should answer the general question: “What do you want to achieve by it?” And to be accurate, there are plenty of milestones you can accomplish.
1. Reduce the cost being spent
As we have written before in our previous articles, outsourcing is mainly aimed to cut down unnecessary expenses on some processes going inside the company. The global market forces service providers to do the job at a lower cost. In other words, if it can not be automated, it should be outsourced.
And the number for this particular reason appears to be rising these days. According to Deloitte Global Outsourcing Survey 2020, nearly 70% of the interviewees named that the cost is the main reason for outsourcing for the enterprises. This answer is only logical. Taking into account last year’s decline caused by the COVID-19 world pandemic, the scale of the market has rapidly decreased, and thousands of companies had no other choice but to outsource their processes or… you know… go bankrupt.
The situation around outsourcing has totally flipped in just a year. If three years ago the global tendency was that the companies were less concerned with the cost and money, 2020 has shown that the prior bases like security and resources the company possess should not be neglected. In the background of a potential global recession, businesses decided to concentrate their budget and intellectual resources to survive and obtain the desired result without any sagging in the long run.
Look at it as a hot air balloon indeed taking the height. This thing is filled with hot air that boosts it up. But then the air starts leaking, and the balloon is surely falling down. The organization’s responsibility here is to drop any weight that burdens them so that the whole crew can ascend and have a happy flight.
Speaking of the same survey, the next thing other than the cost problem is flexibility – 40% of the responses. The ability of the company and its employees to undergo through the changes has obviously become a vital requirement. The stress, confidence in their position future, pretty much any challenge adds the reason to point out that flexibility is the key element not only for employees but also the whole company. But still, both points are the outcome of the world pandemic. So, let’s return to the bigger picture.
Although the survey results were taken after the worldwide social crisis and businesses are still quite shaken, they will all eventually come back to their initial needs. And their needs will tell that many companies use outsourcing as a part of their strategy to grow. The research conducted by IBM some years ago revealed that only 27% of companies outsource to cut costs, whereas 36% use outsourcing to innovate and 37% use it in pursuit of their overall growth. In the Deloitte survey conducted in 2018, the problem of the cost was in second place. The companies at that time were more concerned with the service quality and the agility of service providers.
But how do exactly service providers bring innovation to the business? Well, they just respond to the trend. As for the Deloitte survey in 2018, companies began to demand more innovative approaches. 45% of interviewed organizations agreed to move additional services to providers as they innovate. In addition, 43% of the companies stated that making innovation is a critical component of the contract, and 37% agreed on increasing provider compensation as they innovate. To put it in other words, companies are guided by “best of breed” outsourcing providers.
4. Built architecture
Once again, the main thing about outsourcing (in post-COVID time anyway) is saving the cost of the office suppliance. It is natural that any team needs an office to work at. Organizing a workplace with tech support, data servers, hire a pool of experts, etc. can cost a large amount of investment. And after all, do not forget about maintaining the workplace.
This is typically a problem that startups or small and medium-sized enterprises (SME) face initially. Generally speaking, these businesses cannot afford their own specialty team and develop a niche industry expert pool, not to mention that the average cost per employee in outsourcing is 45% lower.
On the other hand
Security is a top priority for any enterprise. Nobody will invest in the offshore industry if it has the potential to cause a decline. Big enterprises can afford to take these chances. High risks mean high outcomes or high downfall. But even small businesses take measured risks, not to mention giant corporations.
Boeing, in competition with Airbus, has outsourced some of its tactical units to China. However, in the course of this competition, strategic technologies were leaked, and Boeing canceled most of its outsourcing contracts. Therefore it is not necessary to outsource strategic sections of the enterprise. Many companies conduct a comprehensive security audit and continually enforce data risk or cyber security protocols to avoid this mistake. In 2018, 76% of the audits were completed and passed, or the issues were identified.
Outsourcing can cover many bottlenecks in businesses’ workflow. To answer the question of whether to outsource or not, every company needs to look through the fundamental questions:
- Do we often have irregular tasks?
- Does the staff lack fresh ideas?
- Does the personnel need more expertise on particular specialization?
- Do we have a tight budget?
- Is the management under a lot of pressure?
This is not the complete list of questions that need to be answered, but you get the idea. By outsourcing, you can concentrate more on the decision-making part and let us, outsourcing enterprises, do our common job.
- Posted by Mary K
- On September 24, 2021
- 0 Comments