5 Questions to Ask Before Outsourcing
In 2018, over 30% of businesses were outsourcing at least one of their business processes, and that number should end up being over 50% by the end of 2019. The market for outsourcing boomed at a whopping $85.6 billion in 2018 and is also expected to report a significantly higher at the end of the year. It’s not limited to large businesses either. Small businesses are starting to see the benefits of outsourcing certain tasks.
Small businesses gain the benefit of boosting their efficiency by 24% when outsourcing a service provider. One of the biggest challenges that small businesses face is being overwhelmed with smaller tasks that do nothing for growth. They have limited resources, so they end up having to pull resources away from key areas to get these tasks done. Outsourcing frees up these resources, allowing companies to focus on growth and sustainability.
Even though outsourcing provides businesses with an outlet to receive necessary services at a fraction of the cost of hiring an in-house team, the decision of which outsourcing partner to choose, should not be taken for granted.
What will your company do when searching for an outsourcing provider? If you’re like many businesses, you might dust off an old Request for Proposal (RFP), make a few changes, send an email to your “regular list” of outsourcing companies and then choose the outsourcing proposal with the lowest cost.
Unfortunately, that approach is likely to be unsuccessful in identifying the “best outsourcing candidate” for your current needs. While companies frequently outsource to save money, the “big picture” is more complicated than simply reviewing how to reduce expenses.
In this article, Back Office Pro identifies five questions to ask before outsourcing you make a final decision.
1. Is Outsourcing Strategically Aligned with Your Business?
Among the numerous questions to ask outsourcing companies, the first one is outsourcing strategically aligned with your nature of business. Indeed, a traditional outsourcing perspective often focuses on little more than cutting costs — but forward-thinking business managers quickly realized that paying attention to long-term strategic factors is more cost-effective than a unilateral decision based on short-term costs alone. Common strategic considerations for outsourcing in a competitive business environment include enhanced flexibility, growth, adaptability, and innovation.
For example, most businesses plan to increase sales with a prudent outsourcing strategy. When companies are successful in achieving a rapid sales increase, the “best outsourcing providers” will be able to scale up to accommodate increased services — unfortunately, many outsourcing companies will not be flexible enough to “keep up” with the new and faster pace of client outsourcing needs.
In these cases, outsourcing providers submitting the lowest price response to an RFP can frequently cause frustrating problems for clients with new costs, loss of market share, and unhappy customers because medium-term and long-term outsourcing capabilities did not align properly with the client’s growing business needs.
2. How Much Impact Will Outsourcing Make on Your Processes and Costs?
What are your “baseline” costs and processes? In reviewing your outsourcing checklist, there are rarely any “easy” outsourcing questions and answers — especially when it comes to reviewing business processes that are under consideration to be outsourced as a way of helping your bottom line.
A thorough review of current costs and operations will help you in multiple ways that extend beyond any outsourcing decisions. Ideally, your “process review” will entail both a high-level review by top management as well as detailed analysis by managers at all levels. This will undoubtedly lead to other questions — for example, in what areas outsourcing enables your company to improve quality while also reducing costs and providing faster delivery to your customers?
One of the main reasons a company will look for an outsourcing service provider is to free up their valuable resources(49%). 45% of companies think that saving money is a priority, but it always falls back to having the ability to focus resources on growth. Another added benefit is that outsourcing provides businesses is access to unique skills that might not be available in-house (46%).
3. Is Top Management Supportive of Your Outsourcing Decision?
How does your CEO feel about outsourcing? If the outsourcing review and selection process do not fall within the company’s “Top 5 Priorities,” you are likely to be fighting an “uphill battle” — in such instances, outsourcing “failures” are always more likely to occur.
To create the best chance for outsourcing success, “starting at the top” is a winning outsourcing strategy. This extends to departmental levels as well — for example, the Vice President of Human Relations should be fully on-board with outsourcing decisions involving HR tasks.
However, don’t stop with the top levels, such as the CEO and VP of HR — overcoming objections and winning over lower-level managers is also of critical importance to successful outsourcing decisions.
4. Are You Outsourcing to Fuel Your Business Passion Further?
In this list of outsourcing FAQ provided by Back Office Pro, it is prudent to keep in mind a working definition of outsourcing — contracting outside of the company for necessary and non-core services. Even with this straightforward 10-word definition, the “non-core” aspect is often overlooked.
You should always remember that a major benefit of outsourcing is that it gives you and your employees more time to focus on core activities — focusing on decisions and tasks that involve your business passion. For example, this might involve identifying new areas for business expansion. By including this question in your outsourcing checklist (core or non-core business activity?), you are more likely to end up outsourcing for the right reasons.
Small businesses gain a lot of benefits from outsourcing, perhaps, large companies are more likely to outsource. Though they have the resources to manage an in-house team, it makes more sense to delegate certain tasks.
For instance, large businesses often outsource data conversion services due to a lack of data scientists on the job market.
With that said, small businesses delegate tasks because it helps them improve efficiency. They don’t do it for the increase in skillset. As a result, small businesses do not understand the right questions to ask outsourcing companies.
5. Do You Have a Process to Monitor Outsourcing Performance?
How will you know if your outsourcing service provider is living up to their promises and your expectations? One prudent strategy is to use a service-level agreement (SLA) that acts like a “scorecard” to monitor services with measures such as effectiveness, efficiency, conformity, timeliness, user-friendliness, reliability, capacity, availability, speed, and quality.
In reality, SLA monitoring might not be enough to assess overall outsourcing performance. According to Forrester, a successful outsourcing partner will exceed SLA levels by “continuous improvement” in areas such as quality, productivity, customer satisfaction, and cost of delivery.
Should we Adopt Cloud Services to Improve Outsourcing Efficiency?
Most businesses are at least considering moving certain services to the cloud because it creates a more efficient environment. It’s a good idea to follow suit because it helps improve responsiveness. Large businesses are willing to spend more money to get on the cloud because it makes them more competitive and helps in monitoring the outsourcing process.
What Processes Need to be Audited Before Outsourcing?
This is one of the most important areas to consider before outsourcing. Small businesses have to understand the difference between their “busy work” and tasks that are directly linked to growth. Growth tasks should be done in-house when possible, but “busy work” should be delegated.
That doesn’t mean that growth-related tasks should always be done in-house, though. It depends on the available skillsets. Certain tasks are best left to experts include accounting, IT tasks, and digital marketing.
Outsourcing provides a lot of benefits to businesses, but without a clear plan of action, it can also hinder growth if managed poorly.
One More Thing to Remember
Choosing the best outsourcing service provider is almost always a difficult job that should be placed in the hands of highly responsible individuals within your organization. Of course, you should also be looking for highly responsible outsourcing vendors — this level of responsibility is much more likely to find with experienced and expert providers such as Back Office Pro.
Please share your outsourcing experiences with a comment below — and share your thoughts by using the social media buttons.