By Patrick Gruhn, founder of FirstPEX
While outsourcing is as old as business enterprise – if you don’t have time or wherewithal to do something, get another to – it’s not so long ago that the word would conjure up images of foreign call centres or distant offices processing payslips.
At most, outsourcing was seen as a tool – often a crude one – simply to cut costs. But this is changing rapidly as companies, and increasingly small and medium sized businesses (SMEs), come to realise that outsourcing can be far more than a mere cost-saver and efficiency driver, but instead a powerful strategic lever that can provide benefits throughout the business even in today’s difficult economic environment where a double-dip recession is a real risk.
The cost and efficiency benefits of outsourcing are well established, and small businesses are turning to them more and more. IT services are seeing a particular outsourcing boom: the freelancing website PeoplePerHour.com found the nearly 40% of small businesses planned to up their use of contract and freelance IT professionals.
Today, when companies consider major operational or strategic changes, such as a shift in services or a drive into a new geographic area or the promotion of a new range of products, , more often than not parallel to this switch in thinking or strategy there is an outsourcing dimension that can heighten the impact of the new initiative.
For instance, businesses often open in new geographic areas with a minimum of staff necessary to offer their services or products, with as many of the supports services as possible outsourced. Similarly, new products are developed or sold, often with the top company employing only a core team of designers and sales executives, while independent third-party design firms and commission-based sales teams add to the outsourced firepower that the company can deploy.
This surge is in part reflective of changes in the outsourcing sector – with business activity still depressed by the global downturn, outsourcing has become a more affordable and more flexible solution for smaller businesses. They are no longer hemmed in to the kind of detailed and long-term agreements that earlier only large corporates could commit to as outsourcing firms have introduced more varied, shorter-term and less onerous contracts.
Having the dedicated support teams that outsourcing firms can provide for specific services and functions avoids the need for niche investment. The clear and transparent pricing that outsourcing companies can provide is a boon for SMEs, as many are ill-equipped as they are to manage volatile price moves from core suppliers.
The flexibility afforded by the more sophisticated ways that outsourcing firms now offer their services means that companies can begin at a modest level and work up to the level of service required as their structure and tasks become more complex. Companies can therefore grow but at the same time remain agile, able to change the scope and pace of growth according to market conditions or other factors.
However, though any potential double dip may lead to greater outsourcing opportunities and also a greater need for outsourcing, it’s vital that companies realise that what might look attractive at a strategic level does need to be driven through and implemented. It can so easily become mired in process-driven procedures, turf wars among managers or the whirlwind of day-to-day business problems. For the original aims not to be subverted, outsourcing needs implementation as much as inspiration.
Patrick Gruhn is one of the founders of ‘The Elevator’, a top private equity and Philanthropy magazine, founder of FirstPEX (www.firstpex.com), Europe’s first online platform for trading shares in private companies and author of ‘Power Play, How to plan, fund and grow your 21st Century business’.
Join us on