7 Key Business Functions Startups Should Outsource 20 Jun 2018

7 Key Business Functions Startups Should Outsource

It’s one of the most challenging dilemmas faced by every startup, how to build capability internally while managing the cash burn rate. Increasingly, the answer is to build a two-way relationship with a business process outsourcing partner and to outsource those key business functions, which are not critical to the growth of the enterprise.

If you’re running an early-stage startup, chances are you have developed an organizational roadmap, identified the key knowledge and skill areas amongst your core team and developed a strategy to ramp up your organization’s recruitment strategy.

Why Outsource Key Business Functions

While your team’s strengths may be focused on product innovation or technology, your business still requires solid Marketing, Customer Service, Financial strategy, Human Resources, Sales and Administration expertise.

The question is, “How prepared are you to manage your startup’s day-to-day operations, while onboarding new talent or capabilities and outsourcing business functions?” Effectively outsourcing key business functions enables a startup to be average down its staffing costs while keeping your internal resources focused on business gaps in your organization’s operational ecosystem.

Reasons for Startups to Outsource

The survey’s most commonly cited motivations to outsource specific functions included:

Motivations to Outsource

Source: 2016 Global Outsourcing Survey

Driving Strategic Outcomes Via Startup Outsourcing

The results of a 2016 Global Outsourcing Survey compiled from 280 responses indicated outsourcing growth continues to in mature organizational functions such as IT, human resources, and finance while continuing to expand into non-traditional functions, such as real estate, facilities management, and procurement.

Areas to Outsource

1. Marketing

Marketing has evolved to encompass a diverse range of technical skills ranging from branding through to social media and content marketing. Strategically, most start-ups focus on building their brand, and their customer experience.

Why Outsource Marketing Functions

  • Your Paid Search Advertising Isn’t Delivering Results
    When targeted correctly, search-engine advertising is one of the easiest and most cost-effective ways to generate new prospects. Designing your campaign to drive results (clicks, calls, emails, subscriptions, downloads), you need a mix of creativity and technical skills.
  • Staying Up to Date on SEO Is Too Time Intensive
    From keeping tabs on which search engines people are using most when they are online to understanding how algorithm updates like Panda, Penguin, and Hummingbird affect your SEO performance, ensuring your website and web presence sustain their performance demands technical skills and time. Thanks to its constant evolution and technical complexity, SEO is a natural candidate for outsourcing.
  • Your Social Media Fans Are Not Always Your Target Audience
    Social media marketing is about more than simply creating accounts and posting content sporadically. It can be a powerful tool for generating word of mouth, website traffic and boosting your website SEO performance.
    However, if you struggle to find time to update your website and social media feeds with relevant, timely and interesting content that engages your followers you should consider outsourcing.

What Marketing Functions to Outsource

  • Digital Marketing Outsourcing
    Combining content marketing, SEO and social media digital marketing enabled the organization to build a brand, develop a brand presence and recruit prospects and customers, both online and offline. Digital marketing’s footprint includes web design and development, content marketing, SEO, online PR, social media marketing and paid advertising.
  • Content Marketing
    Content marketing is focused on providing compelling and engaging content designed to appeal to your target audience’s interests. According to social media reports, 75 percent of marketing leaders are outsourcing some or the other aspect of their content marketing.

Where to Outsource Your Marketing Functions

The emergence of digital marketing has stimulated a host of digital marketing agencies offering everything from creative services through to technical SEO and social media. Tapping into this network will save your startup time and money while enabling it to focus on its core business.

When to Outsource Marketing Tasks

If you can’t recall the last time, you updated your website, posted on social media or ran a paid advertising campaign it’s time to outsource! Competition for leads, prospects, and customers has never been fiercer, so if you don’t have access to the right mix of expertise and experience to build and maintain a great website and social media footprint, you’re starting from the back of the pack.

Who Should You Outsource Your Marketing Functions

Look for skilled, experienced professional firms with a demonstrated track record and specialist skills that match your specific needs. Set them smart objectives and KPIs and review their results regularly.

Cost Associated with Digital Marketing Outsourcing

Before you dive into outsourcing, you need to have a clear understanding of your marketing ROI. Marketing is both a strategic and a tactical investment. Your outsourcing partner should be able to track campaigns as they drive highly targeted outcomes, be they website traffic, prospect calls, downloaded lead magnets or forms, leads and customer conversions, to ensure they are providing you with the best possible results.

Outsourcing Marketing Functions – SWOT Analysis

Marketing SWOT Analysis

Industries Looking to Outsource Marketing Functions

Financial services firms are leading the move to outsource their non-core digital marketing requirements. Currently, some 40 percent are likely to outsource sales and marketing. Infrastructure businesses, media and telecommunications and the IT sector are lagging the outsourcing trend.

Firms in more mature outsourcing markets such as Australia, Canada, and New Zealand are especially aggressive at outsourcing strategic functions. Research indicates 71 percent of them outsource core products or services, while 48 percent outsource sales and marketing.

2. Human Resources Outsourcing

No startup will ever flourish if they fail to take decisive steps to prepare for growth. Poor management and a lack of access to resources are among the primary causes of a startup’s failure.

Why Outsource Human Resource Functions

By outsourcing your business’ Human Resource function, you are looking to ensure your startup enjoy access to a steady stream of talent while tailoring the firm’s compensation and benefits packages to encourage employee engagement and retention.

What to Outsource in Human Resource

  • Recruitment
    A thriving startup means more clients and thus more headcount. An early startup of under ten staff can readily balloon to a team of 50+ people. Screening, interviewing and on-boarding potential recruits is very time consuming and can be distracting hence many startups outsource their recruitment function.
  • HR Administration
    Typical HR related targets for outsourcing span recruiting to managing personnel issues, compensation, and benefits, payroll management, employee policies, and procedures, outsourcing your human resources management function can take many forms.

Where to Outsource Your HR Functions

The HR function is a notorious information intense area of activity, and it is taking advantage of advances in cloud computing thanks to its emergence as a convenient way to share work and communicate when employees are spread out across different geographies.

When to Outsource Human Resource Functions

If your startup’s HR workload is minimal, you can hire a payroll company for a few hours a week rather than a full-time headcount. Outsourcing also gives you access to an automated payroll system and HR software. Outsourcing HR also enables you to scale up your operations faster, as you don’t have to hire and train your HR staff.

Who Should You Outsource Your HR Tasks

Most industry standard HR outsourcing companies can manage a range of HR functions. This avoids outsourcing to multiple providers fragmenting your strategy and adding complexity to your startup. Outsourced functions include payroll processing and benefit plan administration through to recruiting, training and payroll. A single outsourced HR provider will also require less time managing the vendor relationships.

Costs Involved in HR Outsourcing

HR outsourcing services can be customized based on the client requirements. HR outsourcing costs can vary from a flat monthly fee of $45 to $1,500 per month depending on staff numbers and the blend of services required. Typically, charges can range from 4 percent to 8 percent of an employee’s pretax monthly salary.

Industries Outsourcing HR Functions

Companies are reporting saving of 24 to 32 percent on the cost of hiring the HR staff in-house. Using outsourcing, Shell Oil cut their HR budget by 40 percent in four years. Outsourcing also enables the organization to access a range of HR benefits at a significantly reduced price point.

Synergenics, a consortium of commonly-owned start-up biotech company outsourced HR to TriNet. Accessing affordable health insurance was key to getting the startup up and running and having staff benefits in-house wasn’t feasible. Their provider aggregated many companies into a single pool and was able to offer affordable, ‘large company’ benefits.

InPhase Technologies another TriNet customer leveraged outsourcing to obtain affordable, large-scale health benefits, which helped them compete with larger, better-funded entities.

Outsourcing Human Resource Functions – SWOT Analysis

Human Resources SWOT Analysis

3. Accounting and Payroll Outsourcing

Most startups and small businesses don’t have the transaction volumes to justify a full-time, in-house accounting team. Outsourcing your accounting, payroll and bookkeeping functions to a third-party provider has the potential to realize significant savings.

Why Outsource Accounting Functions

Most startups don’t need a full-time, in-house accounting and bookkeeping team to manage their accounting and payroll needs. Outsource these services to a third-party, save you time and money while enabling you to stay focused on your core mission.

What to Outsource in Accounting and Payroll

  • Payroll
    Payroll is a commoditized and time-consuming function covered by a range of legislative and regulatory provisions.  Payroll goes well beyond simply calculating employee salaries.
  • CFO
    If your company has closed out a round of seed funding or has revenues of less than $250,000 per year, you need a CFO to manage your financial strategy and accounting team. A consulting CFO may be able to direct the development of financial projections, cash forecasting, operating budgets, pricing, reporting, debt management and equity and debt negotiations.

Where to Outsource Accounting Functions

The Philippines has proven competitive in handling outsourced accounting and payroll functions, thanks to its large pool of certified accountants. Aside from their advanced English language skills, they are also proficient in international accounting standards.

When to Outsource Your Accounting and Payroll Tasks

From day one startup need help with day-to-day accounting and regulatory compliance work. Outsourcing your bookkeeping to the right outsourcing partner will give you the support you need to cover your cash management, AP/AR, financial close and tax requirements.

Who Should You Outsource Accounting Tasks

Once you outsource a function, you need to ensure your outsourcing vendor has the required expertise and is committed to delivering the service you need. You also need to ensure you have people who understand your business inside out to manage the relationship with your new outsourcing vendor.

Potential Costs for Outsourcing Accounting Functions

Prices for outsourcing your startup’s payroll function will vary depending on company size, your location, and the outsourcing model adopted. Costs can range from under $100 a month for access to payroll software for just a few employees, to over $1,000 a month for a full-service option.

Outsourcing Accounting and Payroll – SWOT Analysis

Accounting and Payroll SWOT Analysis

Industries Outsourcing Accounting and Payroll

The Automotive, Hospitality, Telecommunications, Textiles, Transport, and the Media & Sports industries appear more likely to report achieving productivity gains through outsourcing. In contrast, the public sector including Finance, Defense, Health, the Energy sector and Agriculture have struggled to unlock the benefit of outsourcing key business functions.

4. Sales and Business Development Outsourcing

While saving money is important to an outsourcing project’s success, the opportunity to access to talent, enhance a startup’s core capabilities while ensuring the business remains flexible and agile is also important.

Why Outsource Business Development

Top reasons firms outsource business development function are to:
Why Outsource Business Development?
Startups are continually challenged with a choice between buying off the shelf solutions and building a fully customized solution. Now, increasing numbers of startups are discovering a third option, the “do it for me” model where your company’s function or problem is entirely outsourced.

What to Outsource in Business Development

Startups are constantly faced with a choice between buying off the shelf software tools or building customized solutions. And now, a third option has emerged, the “Do It For Me” model, under which your startup’s sales and business development function is outsourced entirely.

Where to Outsource Business Functions

Historically, the majority of BPO involved transferring labor-intensive, white-collar administrative functions to lower-cost economies such as India, China, the Philippines and more recently Vietnam.

When to Outsource Sales and Business Development

Few startups are willing to accept getting to market later rather than sooner. However, the first mover advantage conveys substantial advantages incentivizing many startups to explore ways to get there fairly quickly! Outsourcing product development is the obvious choice in these instances.

Who Should You Outsource Business Development Functions

The deep relationships many outsourcing providers develop with their clients is particularly suited to outsourcing business development:

Outsource Business Development Functions

Source: Deloitte Global Outsourcing Survey

Cost Associated with Business Development Outsourcing

Avoiding major capital expenses while lowering operational costs is a strategy adopted by many startups to help them stretch their seed capital and provide the business with more time to create a brand footprint and position the startup for growth.
Cost Associated with Business Development Outsourcing

Outsourcing Business Development – SWOT Analysis

Business Development SWOT Analysis

Industries Outsourcing Sales and Business Development

While Apple designs its iPod in its Cupertino, California offices, it outsources the manufacturing not just because its outsourcing partners can build it cheaply, but to leverage their unique intellectual property in materials science and packaging technology.

The “Do It For Me” revolution has already morphed the way startups buy in services. Now, the same trend is also revolutionizing how startups conduct business. The outsourcing path typically offers faster turnaround times unencumbered by legacy infrastructure.

5. Customer Service Outsourcing

In an era where customers are increasingly marketing and social media savvy, having access to leading-edge talent and a fully automated customer service function that tracks customers down the customer pipeline can make or break a startup.

Why Outsource Customer Service

The main reasons for which firms are outsourcing their customer service functions are:

Outsource Customer Service

Deloitte Global Outsourcing Survey

What to Outsource in Customer Service Outsourcing

Customer Support

In our intensely competitive environment, customers expect brands to be reachable across multiple platforms, posing significant challenges for companies to deliver streamlined yet consistent customer service. Fortunately, a new breed of omnichannel customer service outsourcing providers has emerged to help startups meet that challenge.

Where to Outsource Customer Service

The customer sits at the heart of every business is the customer. Whether you need a dedicated internal customer service team or a mix of non-voice services such as email or chat support, Customer Support outsourcing is available 24/7 regardless of geographical location.

When to Outsource Customer Service Functions

Many startups outsource the customer service support when they hit capacity constraints. Failure to act when support issues first emerge can undermine your brand reputation, erode the perceived quality of your products and services and result in higher levels of customer attrition, which can be devastating for your brand reputation.

Who Should You Outsource the Customer Service Tasks

Startups are using teams of virtual assistants (VAs) for functions as diverse as from making vendor or customer service calls to distributing “Thank You” cards and other automated customer support prompts to prospective clients. It’s important to build trust with your VAs, just as you would with a permanent employee, as they become a virtual member of a virtual team who just happens to work remotely.

Cost Associated with Customer Service Outsourcing

Within some industries, companies are increasingly collaborating or using pooled services for development to manage costs. The automotive industry is a classic example of where manufacturers are collaborating on designing chassis or floor panels to share costs.

While the IP intensive design stages are being retained in-house, they are outsourcing the more expensive development work to take advantage of a surplus of industrial design expertise in India. This also reflects India’s outsourcing sector accelerating its transition to a more knowledge-based country.

Outsourcing Customer Service – SWOT Analysis

Customer Service SWOT Analysis

Industries Outsourcing Customer Service and Support

When you call a 1-800 number these days, it’s common to be answered by someone in an offshore location. Apple, Disney, and Microsoft are all examples of organizations that outsource their customer service functions. This gives them the advantage of a lower-cost base and economies of scale.

Some companies, particularly those in financial services who deal with thousands of customer records are looking to their outsourcing partners for adopting transformative new technologies.

  • Wealth management firms are using AI to analyze huge volumes of portfolio data, identify meaningful metrics, and generate natural-language reports for their customers.
  • International banks are harnessing AI to monitor employee electronic communications for indicators of noncompliant activities to improve their regulatory compliance performance
  • Insurers are looking to use AI to answer potential customer queries in real time to increase their current sales conversion rates.

These projects are embracing outsourcing’s ability to aggregate demand for emerging technologies such as AI and Big Data coupled with cloud-based service delivery to deliver affordable economies of scale to individual outsourcing clients.

6. IT And Tech Support Outsourcing

In a technology-enabled operating environment, a business’ operations reflect being connected 24/7. This “Always On” capability is often beyond the means of many startups.

Why Outsource IT Support Functions

Setting up your business’ IT infrastructure require specialized skills and access to qualified resources. These expense levels make outsourcing IT and Tech Support an easy sell.

What to Outsource IT Functions

Outsourcing IT services were amongst the initial batch of services to be outsourced. Today, leading BPO providers can provide you with a spectrum of outsourced services spanning IT infrastructure, systems and networks, maintenance, and access to 24/7 helpdesk support, all at a fraction of the cost of a comparable in-house solution.

Where to Outsource Your IT Support

BPO companies are equipped to fully support all your IT services using a remote service package. Most also have the staff to provide an on-site physical presence if necessary.

When to Outsource Your Tech Support Functions

Once you’ve identified your startup’s IT needs, reach out to leading BPO providers with specific objectives and performance metrics in mind. Outsourcing remains one of the most cost-effective ways to access skill sets to complement those of the startup’s co-founders.

Who Should You Outsource the Tech Support Functions

Consult widely to identify options you may not have previously considered to give you the best chance of choosing an IT service package that reflects your startup’s specific needs.

Cost Associated with Outsourcing IT Support Functions

There have been many exaggerated claims from offshore outsourcing vendors regarding the cost structures available by tapping into the IT workers in India or China.

As with any outsourced service, the expense of selecting a service provider can vary from 0.2 percent to 2 percent of a transaction in addition to the costs incurred in selecting your preferred vendor servicing the annual cost of the outsourcing arrangement.

These selection costs should include a provision for documenting requirements, sending out RFPs, evaluating responses, and negotiating a final contract. All of this activity represents an opportunity cost to the business.

Outsourcing IT And Tech Support – SWOT Analysis

IT And Tech Support SWOT Analysis

Industries Dependent on IT And Tech Support Outsourcing

A key driver behind the rise in outsourcing of IT and Tech Support is the strategic benefit derived from freeing up internal resources, improving operational flexibility and agility, gaining access to new markets, or changing the established industry rules of competition.

In 2003, Bharti Airtel, an Indian mobile phone company, lacked the capital to exploit a massive domestic growth opportunity. It negotiated an end-to-end IT outsourcing deal with IBM, which tied IBM’s compensation to Airtel’s market growth. Today Airtel has some 40 million customers and is one of the market leaders.

7. Administration and Housekeeping Outsourcing

In startups, it’s common for staffers to multi-task to cover staffing shortages. One common problem with this approach is reoccurring issues around quality. By contrast, outsourcing provides a startup with access to deep expertise and professionalism.

Why Outsource Admin Tasks

One emerging area of outsourcing growth is Administration and Housekeeping. New technologies are enabling a new generation of virtual assistants to manage calendars and handle scheduling.

What to Outsource in Admin and House Keeping

  • Administration Assistance
    With the plethora of online collaboration and scheduling tools, virtual assistants are emerging as a low-cost alternative to a traditional administration resource.
  • Data Entry and Processing
    Data entry outsourcing is a common business administrative process that can readily be outsourced. Often complex and time intensive, regardless of the degree of automation or manual handling data entry and processing have emerged as a hot spot in an impending era defined by Big Data and AI sifting.

Where to Outsource Admin Functions

Offshore outsourcing providers are delivering 30 to 40 percent year-on-year revenue growth every quarter. Beyond managing their rapid growth and driving geographic expansion, some outsourcing providers are helping their customers to compete in innovative ways.

When to Outsource House Keeping and Admin Functions

The advantage of hiring a virtual assistant is that you only pay for the hours they spend on your tasks. This enables a startup to streamline its administration and housekeeping eliminating wasted time spent on appointment-setting, emails and a host of other non-value-added tasks.

Who Should You Outsource Your Admin Functions

The long-established approach to outsourcing key business functions to a single service provider is bound to be with us for some time. Some 39 percent of firms participating in one survey propose to adopt this approach.

Alternative outsourcing models appear to be gaining momentum. Some 50 percent of survey participants anticipate adopting a multisource model with 45 percent reporting plans to increase their use of joint ventures.

The very next outsourcing wave is built around open, collaborative and public business models. A surprising 35 percent of respondents nominated this model as being under consideration.

Cost Involved in Admin Function Outsourcing

Adopting an outsourcing approach to office administration tasks can yield significant cost savings compared to conventional approaches. Startups usually have capital constraints so freeing up costs by eliminating employee compensation costs, office space and IT expenses associated with providing a workspace enable those resources to be deployed for other purposes.

Outsourcing Administrative Functions – SWOT Analysis

Administrative SWOT Analysis

Industries Outsourcing Admin and Housekeeping

A growing body of businesses, especially startups are re-examining the idea of outsourcing their administrative functions. A recent Deloitte survey found some 66 percent of respondents outsource come aspects of their administrative business functions to service providers.

Firms within the Food & Beverages and Business & Professional Services sectors display a greater preparedness to outsource a part of their Administrative functions, while the Health, B2C Retail and Wholesale, Textiles, Media & Sport and Hotels & Restaurants appear less likely to outsource their Administrative functions. 

Business Function Outsourcing to Add More Productivity

Contemporary experience suggests there is a marked difference emerging in outsourcing adoption across industry sectors. The consumer products sector has shown itself to be a leader in outsourcing compared with other lagging industries. The next wave of outsourcing ready industries appears to be the automotive, telecommunications and management consulting industries. Albeit, each sector has its imperatives driving its adoption of outsourcing, ranging from tight margins to declining revenues and increasing levels of competition.

– Back Office Pro

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