Outsourcing Functions – 3 Key Considerations

When it comes to outsourcing, the primary goal for every business is to lower the company’s cost structure and grow the business. The challenge is being able to accomplish both, without sacrificing service. Contracting certain job functions is useful because it frees up employees’ time so they can remain hyper-focused on the work they are best suited to do. If a company specializes in selling truck accessories, or even SD-WAN or 4G LTE, they’re probably not experts in handling HR-related activities- outside experts can fill this skills gap.

Relying on outside partners can make businesses more disciplined, lower costs, and even reduce risks. It can also often give small companies the structure and strategy needed to focus on the company’s core business as it grows. Another benefit is that it provides economies of scale because organizations get immediate access to that expertise they didn’t have before. Whether it’s HR, marketing, sales, billing, and accounting, or customer support – nearly all make smart outsourcing candidates. But, what will work for one business might not work for another. So how do you know what to farm out and which activities to keep in house? Let’s look at a few things to consider.

Calculate ROI

Start by completing a comprehensive review of the job function you’re considering and calculate ROI potential. For instance, using the HR example, recognize what’s the resources or investments are required to stay in compliance and support employees. Would it require a full-time staffer or re-training? If hiring a full-time team member, those costs include salary, benefits, and employment taxes, adding up quickly. There’s also the time it takes to find the right person for the job. A study by Glassdoor said the average company in the US spends about $4000 to hire a new employee, taking up to 52 days to fill a position. (Source: Hundred5.com.) Calculating ROI generally comes from savings in resources, but it can also come from business growth through an increased capacity of current employees, or opening up the business to new revenue potential. An MSP, for instance, that sells unified communications (UC) systems may want to expand its reach to offer hosted call center platforms. If that’s the case, they will need to expand customer support capabilities. Hiring a technology partner to help with trouble tickets is an investment, but teams also need to balance the expected return on investment for selling that additional service.

Document your procedures

Outsourcing requires documenting processes and clearly defining each step of the service. Leaders should outline ‘what triggers the process to start,’ and then record the process outputs and inputs. From there, teams should brainstorm all the individual activities required to reach the desired ‘output’ from start to finish. If a company is building pre-sales procedures, that might include generating the quote and order, liaising with suppliers, preparing paperwork for submittal, submitting special pricing requests, etc. Finally, teams should assign a role to each activity step and map out performance expectations, so individuals know what’s expected of them.

Look beyond costs

While cost savings can be a major driver in the decision to subcontract, it shouldn’t be the only consideration. When evaluating options, it’s critical to look at how moves will change the capital available for other investments in the business. Looking at the impact changes may have on people, and whether it provides greater focus or economies of scale can yield significant protections to the bottom line.