Outsourcing is big business. That is a fact supported by a global outsourcing market that was estimated to be worth some $85.6 billion in 2018. Companies outsource all sorts of things, from key business functions to contract work. The question they must all ask themselves is whether or not outsourcing really helps.
Does your company outsource anything? If not, is management considering outsourcing? Below are a number of ways outsourcing could help your company. They are based on a Deloitte survey from 2016. For purposes of illustration, we will refer to outsourcing payroll to a provider like BenefitMall.
Some 59% of the survey respondents said they outsourced certain business functions as a way to contain costs. That may not make sense at face value, so let’s step back and unpack it. Consider a company with a dedicated payroll department handling payroll and benefits for 100 employees.
Unless that company offers payroll as its core service, the payroll department probably lacks expertise. On the other hand, payroll is what BenefitMall specializes in. The combination of their expertise, efficiency, and volume means they can handle the company’s payroll – and do it for less.
Focusing on Core Functions
The second biggest reason for outsourcing is to allow companies to focus on their core functions. Some 57% of the respondents said this was particularly important to them. They don’t want to be so distracted by functions, like payroll, that keep them from more important things.
Is your company struggling with its core functions? If so, it might be time to look at outsourcing any of the business functions that get in the way. Let the experts do what they do so your company can get back to doing what it does best.
Addressing Capacity Issues
Deloitte’s survey revealed that 47% of respondents outsource business functions in order to address capacity issues. Such issues could take on any number of forms – like a company lacking the physical capacity to take on any more work. A growing IT company is a good example. Though it is not directly related to outsourcing payroll, the point is still made.
That company in question doesn’t have the capacity to accept new contracts. But rather than hire more staff and take on the responsibilities of doing so, they decide to outsource new contracts to partner companies. They benefit by not having to turn away new contracts while their partner benefits from new business.
The last issue to be addressed in this post is improving service. Some 31% of survey respondents cited this as one of their reasons for outsourcing. Now, you can look at this in one of two ways.
Sometimes outsourcing is used to improve the service offered to customers. You might have a company that wants to add additional services that they have no previous experience with. But rather than reinventing the wheel, they contract the services to a partner. This allows them to meet customer needs with high-quality service yet without having to learn how to provide that service themselves.
The other way to look at it is in-house service. Payroll fits the bill here. In-house payroll might just be barely hanging on. The company could provide better payroll service to its employees by outsourcing to BenefitMall. Outsourcing would give them access to state-of-the-art technology, cloud-based payroll software, online account access for employees, and more.
Can outsourcing help your company? That is something only management can decide. But it is worth taking a look at. There are plenty of good reasons for outsourcing key business functions.