Outsourcing has become a buzzword in the world of business in the past 5-10 years. The digital boom and rise of all things tech has meant that liaising with Lisbon or planning with the Philippines has never been easier, which creates many opportunities for businesses all over the globe.
Previous stats have suggested that around 300,000 positions are outsourced each year. At its core, outsourcing is the process of using outside resources to perform tasks or activities that would typically have had to be handled by an employee in-house. Commonly outsourced tasks include everything from website design, graphic design and copywriting to bookkeeping and payroll.
So why do companies outsource?
They may seem small initially, but all of these little tasks can build up and leave business owners, or their team, struggling to get through their to-do list on a daily basis. Some of the most common reasons for outsourcing are reducing operating costs, accessing top-quality staff without having to hire them permanently, freeing up internal resources or streamlining processes. But is it a fad?
History shows that it is, in fact, not. Outsourcing was first identified as a business strategy in 1989. Dr Rob Handfield, Bank of America University Distinguished Professor of Supply Chain Management at North Carolina State University, explained that it took on momentum during the 1990’s, when “organizations began to focus more on cost-saving measures”, and as a result “started to outsource those functions necessary to run a company but not related specifically to the core business.”
Outsourcing and SMEs
Small businesses are one of the key groups that can benefit from outsourcing, and many don’t see this changing as the years go on. A common thread among many SME owners is the lack of time they have to get things done. In small teams, many team members wear multiple hats, meaning that it’s easy to get overwhelmed. So why not outsource the things that can be easily, and often inexpensively, taken on by an outside professional?
Laura Lee Sparks, owner of Legal Marketing Maven, said: “"Most entrepreneurs have great talents but many times they think they can do it all. That can really stall the growth of the business. By outsourcing the day to day back-office tasks, the business owner has more time to focus on generating income."
Instead of the added expense, and often long process, incurred by hiring additional employees to take on some of this weight, outsourcing allows SMEs to focus on core services - knowing that outside helpers are taking care of all of those bits and pieces that can’t be avoided, but end up stealing precious time away from your day.
With small businesses on the rise, and start-ups appearing left, right and centre, it’s easy to see how outsourcing will continue to prove valuable for SMEs of the future. As the cost of labour and general living continues to rise, making savings where possible will more than likely continue to prove tempting.
Outsourcing the right way
That doesn’t necessarily mean it’s a quick fix solution, and great outsourcing does require some thought. “Don't outsource something just because you don't want to do it," says Jim Lanzalotto, principal at Scanlon Louis, a marketing and strategic outsourcing company. "Sometimes there are things you don't want to do but they are important to your core business."
The key to successful outsourcing is working out what your core services are as a business, and the tasks that directly relate to these. These, often, are things that you should keep in-house.
Focus on the development of your team, no matter how small it may be, in relation to these core services - making sure that when it comes to that industry, your people know all there is to know. For example, a design agency shouldn’t necessarily outsource tasks relating to their design activities. Instead, to free up precious time in-house, things like payroll and bookkeeping, IT help, personal assistants or HR consultants could be outsourced.
For outsourcing to become the business model of the future, there are still some blockers and hurdles that need to be overcome. For example, outsourcing services often rely on offshore solutions, which bring their own challenges regarding language barriers and time zone differences. However, don’t overlook the potential positives in these scenarios - some experts believe that time zones can open new opportunities, allowing you to effectively extend your opening hours. There are also security risks to consider when it comes to handing an outside person access to your business information and files.
As it stands currently, some businesses still find these blockers to be too problematic to manage - and, as a result, avoid this way of working. For companies of the future, it may be that there are procedures and processes that can be put in place in order to mitigate these fears, providing a more rounded, and manageable, service offering for companies of all shapes and sizes.