The Case for Outsourcing and How It Drives Growth and Efficiency

It’s a widely held notion that businesses turn to outsourcing to reduce operational costs. However, naysayers are wont in pointing out that these cost savings are an exaggeration. Worse, they even say that it comes at the expense of higher coordination costs for managers, increased shipping and financial outlay, and not to mention, heightened security and business risk for the outsourcer — resulting in lower efficiencies.

The main point of contention is that outsourcing depresses the organization’s overall level of expertise, mainly because you’re letting go of your internal pool of skilled workers in favor of less qualified, “cheap” overseas labor. Which is ironic, because it there are two things going in favor of outsourcing, it is its ability to drive efficiencies and reduce overall cost. That argument glosses over other factors required if you want outsourcing to be a success.

Nobody wants to invest so much time, effort, and resources in a business venture only to see it break down a few months down the line. To create a mutually beneficially partnership that is true to its promise of efficiency and growth, there are several factors to take into consideration.

How to Have an Effective Outsourcing

1. Never outsource your core competency.

If your primary business is fund management, you don’t outsource this function because it is your main source of revenue since your core business revolves around the tasks required to manage funds.

Of course, it only follows that you don’t outsource the key personnel handling this job, as you should also do everything to support these skilled employees for them to thrive and help your business succeed.

One way to support your key employees is by outsourcing job functions that will only serve to distract them from their main duties. For example, you can opt to outsource your customer service, tax, accounting IT, payroll or HR functions to a third party with those core competencies.

In the process, you also leverage on the expertise of professionals who are kept abreast on the latest standards and best practices in their own respective industries. You gain access to expert advice you wouldn’t otherwise get from multitasking employees doing various tasks.

2. Set clear expectations about the scope of business from the very beginning — starting at the negotiations stage.

You need to know exactly what you want to obtain from the business relationship, and cheap labor shouldn’t be the only consideration. Take the time to thresh out a detailed contract based on your business needs. If you plan to expand your business with a service provider in the future, it helps to keep the terms broad to allow some wiggle room as needed.

If you’re unwilling to delegate control over certain areas of your business, then you can opt for a hybrid model where some areas of the business can be handled by specialists for hire, and keep certain aspects in-house.

Create a clear set of standards that both parties can refer to if expectations are not met. Make sure that contracts include Service Level Agreements (SLA), guidelines and other clauses that clearly states the consequences of not meeting SLAs and what the alternatives are when the unforeseen occurs.

3. Go with a reputable outsourcer that values continuous learning.

Do your due diligence and seek out service providers with a solid reputation and the industry certification to show for it. Look for those who are, at least, ISO compliant and who regularly allow their staff to undergo training to meet and, ideally, exceed those standards.

See to it that they don’t just give lip service to excellent service, but show a real commitment to seeing it through in how they operate their business.

4. Maintain a good working relationship with your outsourcer.

Revisit your SLAs and contracts on a regular basis to spot any outdated agreements, and to improve on the existing ones. Do what you need to do to promote a successful, mutually benefit partnership where everyone wins.

With a focused approach and proper implementation, outsourcing delivers large scale efficiencies and growth not just for big corporations, but smaller enterprises as well.

According to Neal Dempsey, Head of Financial Consulting at consulting firm, Grant Thornton, businesses with lower head counts use “on demand” resources as “alternative ways to address recruitment and talent retention challenges…where the business has historically outsourced tasks, such as tax compliance, but regarded it more as engaging a specialist, there is an increasing recognition, and confidence, that outsourcing a wider range of finance activities is low risk and, in fact, solves a problem.”

In the end, outsourcing promotes specialization and helps workers become experts by helping them focus on their main functions. If you want to zero in on their core competencies and elevate industry standards further, consider outsourcing services to a professional.

As long as you do you due diligence and follow these suggestions, outsourcing is still your best bet to boost business growth and improve overall efficiency.

Originally published at www.blog.infinit-o.com.