7 Reasons why your Company Should be Outsourcing
There is often an increased need for constant improvement in the way every organisation functions. This is often caused by functional, revenue, economic or competitive reasons. Hence, business leaders are on a continuous search for ways to cut cost and minimise their overhead.
In a bid to achieve this, business leaders consult subject matter experts to develop strategies suitable for their context in areas where they expect to see improvement.
One of the many strategies businesses adopt to achieve more with less or in even a dire economic state is Outsourcing. Nigeria, for instance, is lagging in the global outsourcing industry, contributing only $2 billion out of the $500 billion the industry generates worldwide annually.
Research showed that globally, India is leading the pack followed by China, Malaysia, Thailand, and Brazil without the presence of any African country.
According to the president of the Association of Outsourcing Professionals of Nigeria, Outsourcing holds the key to job creation. He noted that the global market size of outsourced services was worth $92.5 billion in 2019. And in 2020, Outsourcing is expected to create a minimum of 38 million jobs globally.
Alluding to the importance of Outsourcing Peter Drucker stated: “do what you do best and outsource the rest.”. You’ll agree with us that the need for Outsourcing cannot be over-emphasized. Let’s look at what Outsourcing is and why your organisation should consider it in your business strategy.
What is Outsourcing?
Outsourcing is a process where a business contracts a portion of its business or functions to a third party. The third party is typically a specialist in a particular field and based locally or in a different country.
There are several types of Outsourcing you can choose from to improve your organisation’s productivity, reduce cost and improve your revenue drive. For most business leaders, your organisation’s need would influence the type of Outsourcing you’ll opt for. They include:
Types of Outsourcing You Need to Understand
- Business Process Outsourcing (BPO): This is a process of contracting a specific business task like payroll management to a third-party service provider.
- People Outsourcing: Is outsourcing a section of the workforce within an organisation. It involves the recruitment, training, and management of a professional team (e.g. the sales team, bank tellers or customer service executive) to manage and deliver sustainable service to an organisation.
- Project Outsourcing: This is a process of contracting functions or tasks that are not the core functions (e.g A bank can outsource the development of it’s mobile app) to a competent partner to enable your organisation to focus on their core activities.
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Reasons Why Companies Outsource and Why You Should Too
- Cost-Saving: Outsourcing non-core functions will help you pay more attention to those that matter the most, and bring in the most revenue for your organisation.
- Risk Transfer: Outsourcing enables organisations to transfer the risk involved in a project or task to the Outsourcing provider. In some cases, the risk is shared with the service provider, which also ensures that your risk profile is lower.
- Access to Expertise: Outsourcing provides you with a pool of experts in a particular field to enable your organisation to deliver better results.
- Saves Valuable Time: Organisations who opt for Outsourcing can save valuable time in areas where they lack competence. Things like hiring, training and improving staff competency can slow down your speed to market or project delivery time.
- Capacity Management: Outsourcing allows your organisation to utilise its core staff optimally instead of overwhelming them with high demands for several aspects of the business.
- Access to Technology: Outsourcing gives your organisation access to technologies it would otherwise not have access to. Some of such technology include field management software solutions like Outwork used in tracking and managing field teams and remote workers effectively.
- Focus on Core Processes: Your organisation can focus on its strengths and core processes when you outsource tasks that are akin to weak points for you.
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Some business leaders know they need Outsourcing but often get stuck in deciding on the best solution for their organisation’s reality. The answer to this challenge is the Outsourcing Decision Matrix.
What is Outsourcing Decision Matrix?
The outsourcing decision matrix is a strategically developed plan that helps business owners and decision-makers to figure out their plan before the final decision to outsource. It helps you consider two essential factors in Outsourcing any task or project:
- How strategically important is the task for your business? Strategically important tasks are sources of competitive advantage.
- What is the task or project’s impact on your organisation’s operational performance? Tasks which have a high impact on operational performance are those which, if done well, contribute significantly to the smooth running of the organisation or, if poorly done, they disrupt it.
An Outsourcing Decision Making Matrix contains the following quadrant:
- Form a Strategic Alliance – Tasks in this quadrant are high in strategic importance but contribute little to operational performance. Although you need to retain control of tasks in this quadrant to ensure they are done, and you get the quality you want; They are relatively insignificant in terms of the smooth running of operations and so not worthy of full in-house focus. Tasks here require you to form a strategic alliance with an outsourcing partner.
- Retain – Tasks in this quadrant are high in strategic importance and have a significant impact on operational performance. These tasks here are best kept in-house to enable your organisation to retain maximum control.
- Outsource – Tasks in this quadrant are essential for successful operational performance, but are not strategically important. Outsource tasks or projects in this quadrant because they’re not worth spending in-house time managing. For example, a bank can decide to outsource security instead of spending time on that.
- Eliminate – Tasks in this quadrant are not crucial to your organisation’s overall strategy, nor do they make a significant contribution to its day-to-day operational performance. Although you might not be able to eliminate these tasks, it’s important to check why you’re doing them.
- On a global scale, companies such as Boeing, Apple, Xerox have successfully created and sustained value year after year by embracing Outsourcing. Companies need to make a decision to improve their productivity and boost their overall revenue.
At Workforce Outsource, we help businesses focus on their core competencies, shorten their time to market and reduce the cost of setting up across Nigeria and Africa. Call us to schedule a free consultation and discover how we can support you to achieve your objectives through people, and process outsourcing services.