Outsourcing – have you weighed all the options?

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Outsourcing – have you weighed all the options?

Few would deny that a constant effort is to outsource as much as possible. Do you want to save money? Outsource. Do you want to improve the quality or capacity of your work? Outsource. Do you have a troublesome area or group of people to deal with? Outsource. In today’s world, most outsourcing entails offshore. Parts of business finance shared services are being offshored. There are different Outsourcing Options that you can explore. 

Is outsourcing the way of the future?

Many businesses view employees as “a cost of doing business.” Yet this “cost” is responsible for the creation of products and services, the development of innovations, the satisfaction of customers, and the operation of our enterprises. 

Employees are a company’s source of intellectual capital. Over the last few years, the reason for outsourcing and offshore has altered slightly. Outsourcing is increasingly moving away from transactional services and higher-end decision and analysis tasks.

What exactly is the issue here? 

Many experts believe that the future of shared services resides in rising ‘up the value chain’ by providing more analytics and decision-making, which will improve business benefits. However, who will do these value-added services if most of your employees are outsourced? Where would innovations and value-added analysis come from if no one understands billing processes, receivables, client behaviors, and the subtleties of your business? Your outsourcer is in charge of future business process enhancements.

You need people who understand and are strongly connected to your business if you desire innovation and ongoing development in business operations. Employees that work for you are usually more committed and loyal than outsourcers who may be located across different time zones and continents. To be sure, this isn’t only a problem for shared services; manufacturing organizations have been learning a hard lesson for years: creativity and fresh ideas often originate from people who have ‘hands-on’ expertise with processes and production lines.

Conclusion

There are three key ways for an external outsourcer to be less expensive than an in-house team. 

  • First, the job is transactional and is added to an ongoing system, or the outsourcer has significant economies of scale and charges mostly on variable expenses.
  • Second, the outsourcer is located in a country with lower wages. However, as wages have risen, labor arbitrage benefits have decreased considerably.
  • Third, the outsourcer is better than the in-house staff performing the processes.

The third approach is frequently the determining factor for many. In general, if your in-house team’s processes are well-executed and you have a good understanding of total costs, an outsourcer, who must also make a profit margin, will find it difficult to outperform your in-house team in a well-developed business case.

If, after all of this, you still don’t see any savings from outsourcing, and the savings are smaller than 10 or 20 percent, you have to ask yourself if the current and future business consequences and risks are worth it. So, the next time someone brings you a cup of outsourcing, take a moment to think about it.

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