Why Outsourcing is More Important Than Ever

Chris Giorgio

the concept of outsourcing

The COVID-19 crisis continues to expose the vulnerability of concentrated supply chains and business functions. Even as early as the 1st  of April, 14% of the professionals reported major business disruptions and another 21% started anticipating massive issues. 

To cope up with the situation, businesses continue to look for ways to thrive through the situation. One such remedy is outsourcing business functions.

Let’s find out why outsourcing is more important than ever:

How Outsourcing Can Help During These Difficult Times

Eliminates Bottlenecks

During these difficult times, thousands of businesses are struggling to proceed with business activity due to problems in obtaining supplies, delivering orders to customers, and even staying open amid coronavirus lockdowns. Many business functions have thus been disrupted, especially those associated with external parties.

The worst thing businesses can do during such times is to continue to manage everything themselves. This is particularly true for small businesses. With limited resources, it becomes even more important to utilize the available resources wisely and outsource any activity that they don’t necessarily need to handle themselves. 

Outsourcing certain activities, such as customer service, accounting, shipping, IT, etc., can reduce the burden and eliminate the different bottlenecks that may come up during the COVID-19 crisis. Thus, you will be able to focus on your core business activity or functions during the crisis. 

Keep in mind that it’s more important than ever to retain your suppliers and clients during these troubling times, requiring you to maintain efficient communication and support to them. Getting stuck with endless coronavirus-driven issues will keep from that critical function.

Besides, when you free yourself of shipping and customer service issues, you can focus on developing online business and marketing opportunities. In exploring online opportunities too, you might want to outsource the technical part, such as the development of an e-commerce site.

Numerous companies offer web development and digital marketing services, including SEO, PPC, social media marketing, content marketing, etc., to businesses around the world. You may have ignored them earlier on, but this is the best time to try them out.

Your team may have members possessing some knowledge of IT. Yet, if you think about it, the time they spend resolving IT issues for the rest of the team keeps them from taking care of the key tasks that are on hold. Your business won’t be able to grow during these times if you start compromising on the core business functions.

The clock is ticking, so you must prioritize your time for activities that not only help your business survive but also accelerate growth while outsourcing other tasks.

Ensures Speed and Flexibility

According to Marc Benioff, the founder and CEO of Salesforce, the new currency of successful firms these days is their functioning speed, which is another reason why outsourcing is more important than ever.

It has become even more important during the current coronavirus crisis as business operations have come to a stop. 

However, speed doesn’t quite help when there’s no flexibility. For instance, no matter how smooth your new accounting software is, if it’s not flexible enough to allow integrations with different CRMs or e-commerce platforms, such as Shopify, it’s of little value.

There’s no secret in how badly supply chains at every stage have been affected. If you rely on raw materials from China or another seriously affected country, there’s little you can do. You must explore alternative supply options and avoid depending on a single supplier even after the end of the pandemic.

If you source items locally, talk to your suppliers about outsourcing the supply chain. The same can be considered for product deliveries to end customers. The last thing you’d want is to keep yourself engaged in supply chain bottlenecks when it can easily be handled by external parties.

But how do you know whether an external party is sufficiently fast and flexible to handle your functions efficiently? Most firms, especially those offering digital services, offer an initial trial period or an initial trial project to help you examine the quality of their services. 

If you aren’t sure after the trial project too, you can start with a one-time project and analyze the results before making long-term commitments or making bigger investments.

Since the companies you look to outsource business functions specialize in those activities, they’ll probably handle them better than you can and offer products and services that match what’s trending on the market and help you stay on top of the competition.

Lowers Costs

No matter what, the ultimate goal of every business is to make money. No businessman would want to lose business and profitability due to the COVID-19 crisis, which is why businesses are doing their best to save costs. 

Cost-saving is another reason why outsourcing is more important than ever. Had it been an added expense, businesses around the world wouldn’t have considered outsourcing at all. 

Outsourcing non-core business activities help you save operational, labor, and administrative costs associated with managing them in-house. This is particularly true when you can outsource to entities in third world countries. These countries host the world’s major outsourcing hubs with highly educated yet cheap employees than those in developed countries. 

Allows Access to Most Advanced Technology and Specialized Resources

With remote working taking over the business world amid the coronavirus crisis, companies are in immense need to invest in advanced software to make sure that work isn’t affected. 

Understandably, however, few businesses would want to risk money by experimenting with new unknown solutions with no guarantee of success. Outsourcing tasks automatically helps you access the most sophisticated technology used in that industry without spending a penny on those tech tools. 

Reputable outsourcing firms specialize in business activities with constant access to niche technologies and crucial development tools and subscribe to the latest frameworks. 

On top of that, the existing crisis will not last forever. Why invest thousands of dollars into niche technology when you plan to get back to the normal office setting when the pandemic is over? 

By outsourcing, you should be able to use the latest technology for your business projects without paying for it and can easily opt-out of it when it is no longer required. Also, you don’t need to worry about maintaining the technology or managing updates when you consider outsourcing.

Similarly, just as outsourcing firms have access to advanced technology, they possess a vast portfolio of specialized resources. These might include specialized talent, such as web developers, engineers, etc. that your business may not be able to afford to hire, especially during these hectic times. 

Outsourcing lets you leverage both human and other resources specialized in various different functions. Plus, you get to save on recruitment and training costs as well as the office space required to host the teams. 

Helps you Grow and Adds Value to Your Business

You may have decided to outsource to survive or address the troubles presented by the coronavirus pandemic, but the decision may actually help your business grow. 

The advanced technology and specialized resources possessed by reliable outsourcing companies may turn your processes more efficient than before. Maybe, you were not able to grow because you were not able to focus on your core business tasks, or other in-house activities, such as customer service, IT, or shipping were not providing sufficient support. 

In either case, outsourcing supporting operations should give your business a boost and help it grow way faster than before. 

Given the high competition, many outsourcing companies now offer a range of extra services to stand out from others. These services improve efficiency and productivity while lowering the risk and costs within your firm, both during normal circumstances and in times of crisis.

Outsourcing Challenges

No doubt, outsourcing business functions is an incredible remedy to the problems faced by businesses following the COVID-19 crisis. However, the global pandemic has impacted the outsourcing industry itself, especially companies offering IT services. 

When looking to outsource business functions, keep an eye on the following areas:

Work-From-Home

It’s important to understand that most outsourcing plans were originally formulated to support businesses and help them achieve their goals, not to ensure their very survival through a global pandemic that necessitated widespread WFH procedures.

It’s true that the outsourcing industry has done incredibly well considering the situation. For instance, India has been able to manage about 80% of its pre-pandemic productivity levels despite 9 out 10 employees in the country working from home. However, they need to have disaster recovery plans that address emergencies, like the global COVID-19, in which the resources of the outsourcing service provider are working from home. Outsourcing companies will need to modify the provisions on contracts to factor in cases like these.

On top of that, outsourcing companies specializing in IT have to have protections and pre-requisite controls in place like never before. They must think about how confidentiality, data security, privacy, audit rights, and intellectual property must be secured with remote work settings.

Service Level Fluctuations

You’ll need to understand that every industry has somehow been affected by the COVID-19 pandemic, and outsourcing companies are no exception.You may require them to maintain the same level of SLAs, but it’s not practical these days. 

These are unprecedented times for all industries. As companies prioritize the key areas to cope up with the crisis, service levels in other functions will be impacted. 

Like other suppliers, many service providers and outsourcing firms have sought relief in performance standards and service levels due to distracted workers, lack of access to technical tools, and limited bandwidth with the work-from-home model.

To accommodate the effects this pandemic is causing to people, you should remain flexible, both contractually and operationally, when outsourcing activities. Also, consider giving some time to service providers as they adjust their use of the available capacity to meet the current challenges.

However, you should never be prepared to accept broad excuses because it will kill the purpose of outsourcing. Talk to the company and ask which obligations it cannot meet, the reasons behind not meeting SLAs, and what modifications or solutions have been planned to resolve the issues.

If the fluctuations in service levels seem unreasonable or aren’t backed by solid reasons, look for alternative options or make a more informed decision.

Changes in Price Models

You should also know that many outsourcing firms have revisited their price models and made modifications for the time being to reflect the operational shifts. 

For instance, many service providers have now switched to the time-and-material pricing model, which involves billing customers for actual work scope based on hourly rates of labor.

This can be good and bad for your business, so be sure to conduct proper a cost-and-benefit analysis before signing contracts with outsourcing companies. 

Staying Conscious of the Post Lockdown Future

Even though the COVID-19 pandemic has been around for a while now, the situation will not last forever. Hence, whatever contractual, operational, and financial changes you make, including those associated with outsourcing business functions, you must keep in mind that things will go back to normal.

As your business fights through this interim period, you need a plan to ensure quick recovery and return to the original course of business activities.

Once coronavirus is over and the lockdowns are relaxed, you will need to negotiate with the outsourcing companies to discuss and clarify what business functions they will continue to take care of.

If the outsourcing firm continues to take care of certain functions in the post-lockdown period, talk about revisiting the SLAs and eliminating any reliefs. Likewise, questions like “What portion of the service providing team will continue to work from home?”  and “How quickly can the service operations get back to normal?” should be asked.

Final Word

By now should have realized how outsourcing business functions can help your business thrive through the COVID-19 crisis. From cost savings to staying productive and accessing technology, there are many benefits of outsourcing today. Yet, to do it the right way, you need to be aware of the various challenges associated with outsourcing.

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