Many business owners are hesitant to delegate jobs, but if you’re scaling up fast the time will soon come. Here are the pros and cons of outsourcing services.
What is outsourcing?
Outsourcing is when a business hires a third party to complete a business process on its behalf. It can be done for any number of reasons, including a lack of skill in-house, a drive to lower labour-costs or to improve the quality of the given service.
The outsourcing world is chock-full of jargon, so you may also hear it described as BPO (business process outsourcing), offshoring (outsourcing services carried out abroad), or nearshoring (outsourcing services carried out closer to home in bordering countries).
It can be a great way for scale-ups to keep on top of everything, and even improve business processes. It may cost money, but then an entrepreneur’s time is precious – why not let the experts take care of the admin while you channel your efforts into growth?
The UK and outsourcing
Outsourcing is big business. In 2016 in the UK, the value of outsourcing deals totalled £6.2bn, with customer services accounting for a significant chunk (17 per cent) of this. Interestingly, only four per cent of customer service contracts signed last year were to be delivered offshore.
This is according to arvato, a support services company, which also reported that in the first half of 2017 there were £5.2bn worth of outsourcing deals agreed, which represents an increase of 23 per cent year-on-year.
The pros and cons
The pros and cons of outsourcing vary from business to business, and service to service.
On the one hand, delegating a service to a third party with expertise in the area can in theory provide a cheaper, higher quality service than trying to muddle through with inexperienced in-house staff. Take the example of accounting – while it may be possible to do your own accounts, small business employees are often juggling plenty of tasks as it is, and this may be better addressed by an expert.
Bizdaq CEO, Sean Mallon, said: “At Bizdaq we outsource our web hosting and some of our development, as well as the occasional design job. We found that, whilst we could bring people in-house, the cost involved in training and equipment, not to mention time, generally makes it an easy option to outsource.
“Outsourcing helps us stay as lean as possible. Particularly in the early stages of the business, the ability to keep costs low and hire people outside of the business to do the things you can’t is a godsend. Not only does it give you access to an expert when you need one, it reduces your costs and helps you to focus on what needs to be done – all critical for small business owners.”
On the other hand, there are negatives too. We have all seen outsourcing scandals make the headlines, and herein lies the problem – you might outsource the task, but you can’t outsource the liability. If a third-party provider messes up, it ultimately reflects poorly on the business that hired them.
Outsourcing in action
McCarthy & Stone is a retirement property developer and it had a problem – it was missing a significant number of customer calls.
National sales operations director at McCarthy & Stone, Richard Jones, explained: “As calls were directed to individual developments, we were essentially missing out on 80 per cent of incoming enquiries, due to the fact that our sales staff at developments were busy with other face-to-face contact.
“It was obvious that we needed to find a solution where we could re-capture lost opportunities, maximise the return from our marketing investments such as door drops, mailshots and advertising and begin to build a relationship with potentially new customers.”
The team decided to outsource its customer care services to a company called Ventrica, which set up a team of advisors to work solely on McCarthy & Stone’s behalf. Jones believes the arrangement is a true partnership, and 78 per cent of previously lost sales opportunities are now captured.
“When you consider that each individual enquiry could potentially be worth up to £1m, you can understand the massive return on investment that outsourcing customer contact can deliver,” said Jones.
Is it right for you?
Ultimately, outsourcing is a huge industry, and it all comes down to finding the right partners.
Don’t treat it like passing the buck – vet the service provider as you would any other employee you delegate to.
You have to be able to trust they will perform the task to a certain standard, but it doesn’t hurt to keep an eye on them, and check in now and then.
This article is part of a wider campaign called the Scale-up Hub, a section of Real Business that provides essential advice and inspiration on taking your business to the next level. It’s produced in association with webexpenses and webonboarding, a fast-growing global organisation that provides cloud-based software services that automate expenses management and streamline the employee onboarding process.
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