Why Do Companies Choose to Outsource Work?
The international outsourcing market is estimated to be worth $90 billion USD and nearly 54% of all companies use third-party support teams to connect with customers. But why do companies make the decision to outsource work in the first place?
The concept of outsourcing can seem counterproductive at first glance - hiring services outside the company, usually physically further away. However, upon deeper inspection, outsourcing is not only a smart move, it’s also becoming more and more popular as a strategy for both SMEs and larger businesses.
Companies choose to outsource for a multitude of reasons, mostly relating to the overall growth and increased revenue of the organization. The main motivations for a company to outsource are to:
- Increase profitability
- Facilitate growth
- Access global talent
- Adopt specialized software
- Save time and money
If you’re considering hiring an outsourced workforce or are curious about the role of outsourcing in the modern business landscape, here’s a deeper look into the driving factors.
Hiring an outsourced team to assist with services like sales, chat support, and customer success not only sustains the fast growth of a company, it also keeps costs to a minimum. You may be thinking at this point, ‘how does employing more people equate to savings?’ and the answer is simple.
Contact centers tend to be located in countries with lower salaries (in the past this has correlated to assumptions of low quality workers, yet in 2019, companies like CloudTask are challenging these misconceptions). Therefore outsourcing actually enables businesses to increase their workforce at a much lower cost than hiring locally.
Based on research from the Aberdeen Group, 50% of top-performing companies utilize contingent workers for over 40% of their workforce. As a result, these companies are 30% more likely to boost their revenue beyond 10% year-on-year.
“50% of top-performing companies utilize contingent workers for over 40% of their workforce. These companies are 30% more likely to boost their revenue beyond 10% year-on-year”
Those numbers are impressive in their own right but then factor in the savings made from not needing to supply another office, technology, training, and day-to-day admin work. Plus, service centers don’t just provide all the necessary resources, they actively build and nurture a positive culture. A culture where staff are happy and motivated to learn, subsequently being more likely to book appointments, close deals, and deliver exceptional customer service - meaning a positive return on investment.
According to the U.S Bureau of Labor Statistics, only half of new companies survive for more than five years. These initial five years are arguably the toughest and most demanding of any company’s life cycle, as ventures attempt to scale at the appropriate speed. For example, a study by McKinsey suggests that a tech company growing at an annual rate of 20% still faces a 92% chance of failure.
The solution then? Faster growth. Business is competitive and requires more than an idea to be successful - it needs infrastructure, people to promote, maintain, and support the growth. Outsourcing is an easy fix to speed-up hiring and training processes, and generate teams ready to facilitate the company’s growth in a short space of time. Rapid growth comes with the rapid acquisition of talent, one of the key capabilities of an outsourcing company.
In fact, research by CSO Insights shows that in a traditional sales team, 37% of sales reps fail to make their quotas. Meanwhile, of the companies surveyed, 79% of those who outsource their sales services felt they have been able to scale faster as a result.
Access Global Talent
Outsourcing has received its share of criticism in the past. People often assume outsourcing entails rows of unhappy people on the phone, staring at the clock on the wall. This is no longer the case. In an age of mobility, outsourcing is a platform to hire people from around the world with global knowledge, all centralized in hub cities. Such a diverse team of people means there is a broader pool of talent, multiple languages can be supported, and companies have access to local understanding of specific markets. Ultimately then, companies don’t need to deal with hiring bottlenecks; the outsourcing company is responsible for finding and pairing the right people with the right clients.
At the same time, outsourcing can help companies avoid hiring specialists they don’t need on a long-term basis. If, for example, you want to update the copy for your chat services but employing a UX writer part-time is not cost efficient, a member of the outsourced team can take on the responsibility and then return to other priority tasks. Quality is not compromised here either - with such a big selection of skill sets across the market, outsourced employees are more likely to have previous experience with areas such as content, marketing, finance, sales, communications, and more.
Adopt Specialized Software
In conjunction with accessing global talent, companies who outsource equally reap the benefits of not having to provide employees with technology. Besides from desks, computers, and phones, many contact centers come with built-in specialized software needed to deliver outstanding service. CRMs, marketing tools, design programs, conferencing solutions - all this software is integrated and ready for use as soon as a company signs up with an outsourcing business.
Hiring is its own discipline, and it’s easy to overlook the importance of training. Outsourcing, however, speeds up the process without losing quality. Outsourcing typically comes with tailormade in-house training programs, that have been iterated upon based on experience. Beyond training, outsourcing ensures employees have the tools and data to effectively perform their work. Included provisions like an office, resources, and software are a particularly large selling point for companies who decide to outsource.
Save Time and Money
In 2019, the average cost of onboarding a new, full-time employee was $4,125 USD. For companies who need to grow significantly, and fast, this figure increases exponentially. Alternatively, outsourcing has been said to save companies up to 20% on overall process expenses. These savings can be put towards investing in other areas of the company - a huge luxury for smaller businesses who may need to focus on marketing.
Similarly, because outsourcing streamlines the work process, it frees up large amounts of time for companies to focus on core business needs. Outsourced teams take care of vital components like sales and customer service, enabling companies to concentrate on higher-level vision and practices. Outsourcing companies are accountable for building trust with their clients, assuring that targets are consistently met and thereby removing the need for micromanagement.
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