Shipleys LLP

Chartered Accountants and Professional Business Advisers

Outsourcing

Peter Drucker, management consultant and author, calls outsourcing America’s fastest growing industry, as more and more businesses outsource non-core business activities to focus their attention on their core competencies.

When it is done successfully this can save money and help competitiveness, especially when operating in a global market. British Airways for example saves$23m for every 1,000 jobs the airline sends to India.

Many business have a tendency to consider outsourcing for top and basic level support services, such as strategic business advice and premises cleaning services, but not much else in the middle. Certainly the business consultancy industry grew much quicker than many of its clients, with global revenues growing by 7% in 2016 to $133bn

What might be outsourced?

In reality, there are numerous activities for which outsourcing may be appropriate including:

  • Data entry/processing.
  • Office services / cleaning.
  • Creative work.
  • Customer support.
  • Research.
  • Compliance & risk assessment.
  • Web design and search engine optimisation.
  • IT functions, e.g. programming, development and maintenance.
  • Telephony / call centres / PA / virtual assistants.
  • Health & safety.
  • Accounting / bookkeeping.
  • Payroll.
  • Legal services.
  • Marketing / PR / Copywriting.
  • Transport.
  • HR Employee benefits management.
  • Manufacturing.
  • Strategic planning.

Advantages of outsourcing

When done well, outsourcing offers advantages such as:

  • Reduction of operating cost. And it’s scalable – you pay for what you use.
  • Increased productivity – frees up your time to focus on what you are good at and what will drive the most value to your customers.
  • Leveraging specialist suppliers so you can access skills without having to master them internally.
  • Flexibility. For example, if you decide to outsource your creative work to an organisation on the other side of the world, their team can be working while you sleep.
  • Avoiding capital investment
  • Project acceleration and continuity (for example sickness o=in your own organisation).
  • Reduced employer headcount / obligations.

Potential disadvantages

  • Security and confidentiality.
  • The time invested finding, training and managing outsourced workers. Unfortunately, often a bigger investment of time than you initially estimate.
  • The negative PR that can arise if outsourcing results in job losses.
  • Reduced control and the challenges of monitoring and managing the work of people in a remote location to whom you do not have access.
  • Timezone differences. These can be good if work is being done whilst you are asleep but a  challenge if you have to wait hours for a response to an email or work early or late to make a call to find out what’s happening.
  • Potential loss of originality – are you just replicating what your competitors are doing?
  • Loss of Intellectual property.
  • Reduced effectiveness if the people you’re outsourcing to don’t understand the business as well as your team.
  • Mislaignment of the outsourcers values and those of your organisation.
  • Lack of face-to-face contact – will that make the relationship more challenging?
  • Quality control.

Conclusion

In the experience of our guests, outsourcing is most likely to be successful if control is retained by a strong leader who really understands what is being outsourced, who can manage the relationship, share the objectives and success measurements and monitor the work produced/service provided. It’s the solution that needs to be outsourced, not the problem itself. Careful documentation of service standards / expectations and responsibilities is crucial, and this can be very time consuming.