Outsourcing has developed a bad reputation over the years. Media coverage of outsourcing practices by high profile Australian brands – such as Bonds and The Iconic – focuses heavily on jobs lost to offshore competitors and the resultant damage to the Australian economy.
However, outsourcing is a rising trend. Research into outsourcing shows that 80 percent of Australian businesses outsource and mostly use offshore resources. This is a dramatic increase since 2012, when a survey conducted by the Australian Business Process Outsourcing Association, together with IBM and Fuji Xerox, found that 45 to 65 percent of Australian organisations outsource some of their business processes. Despite this statistic, 83 percent of respondents would prefer not to send work offshore.
The stereotype of outsourcing as a means to access cheap overseas labour is changing as more and more businesses look to outsource domestically – a practice known as ‘onshore outsourcing’. While onshore outsourcing is nothing new, the variety of functions that are outsourced has peaked in recent years. Information technology, public relations, human resources, virtual assistance, engineering, distribution and logistics, and finance and accounting are just a handful of the services on offer.
For many business owners and management teams, onshore outsourcing provides assurance above offshore outsourcing. There is no language barrier or time zone challenges, and the service providers understand the local market, regulations and legislation. Additionally, reputational and security risks are minimised as customers take comfort in knowing their work is taken care of domestically.
Accessing world-class skills and expertise
An increasing number of businesses are approaching outsourcing as a way to access the expertise, skills and technology they lack in-house.
Outsourcing certain functions, such as marketing or accounting, gives a small-to-medium business access to a whole team of experts they could not employ on their own. The best service providers will invest in education, research and the latest technologies, and have experience working with other clients that have faced similar challenges.
Creating scalability and flexibility
Outsourcing non-core functions of the business can provide greater flexibility, particularly for businesses going through a difficult transitionary period.
For example, a business experiencing rapid growth is likely to require additional layers of management and new business processes but may not yet be profitable enough to establish these functions. Outsourcing can lower overheads until such a time when the business can appoint additional managers or establish new processes. This can be particularly beneficial for businesses uncertain about how long their growth will last.
Similarly, businesses that are sensitive to seasonal or economic changes may benefit from the additional control over the costs that outsourcing affords.
Saving time and money
For many small to medium businesses, the owners or management team must wear many hats. Juggling the accounts, supervising the latest direct mail campaign, handling customer queries and IT back-up can leave little time for ‘real work.’
Outsourcing can allow the business owner or management team time to focus more productively on the business’ core capabilities while having an external expert look after the operational functions.
Tips for outsourcing
Whether outsourcing domestically or overseas, the following tips will help you to do so effectively:
1. Analyse your own business first – Look carefully at your core capabilities. Businesses should be careful to only outsource those functions that are not core to the business. For example, if your business is famous for its personalised customer service, outsourcing to a call centre may be detrimental to the business.
2. Ask the right questions – Don’t be afraid to put your service providers to the test. Ask for evidence of past experience, testimonials or a portfolio and make sure that the quality of their work matches your expectations.
3. Set clear objectives and deadlines – Be specific about the deliverables you expect and be realistic about schedules.
4. Read the small print – Ensure the scope of the project is laid out in a contract and agreed to in writing. Where a specific piece of work is involved, it’s important to be aware of who will own the intellectual property at the end of the relationship.
5. Monitor performance – Set milestones or checkpoints from the outset and stick to them. Ensure that the service provider is aware of the criteria by which they will be evaluated.
6. Manage the relationship – An outsourcing relationship works best when the business and provider work together collaboratively and in partnership.
William Buck provides outsourced accounting services to businesses across a range of services. Ask us for more details.