We often get asked about the commercial viability of outsourcing vs. remaining in-house. The answer to this question is not necessarily straight forward. It is contingent on a myriad of variables within a business. Having said that, most companies share one goal in common: to increase revenue and reduce operating expenses. After all, a business cannot operate without its people so hiring correctly is critical. In our article we unpack the cost of each option, quality considerations and time efficiency factors.
Quality & Scalability Considerations
In some cases, outsourcing could mean trading-off control for cheaper services. To mitigate possible quality concerns, it is important to explain exactly what needs to be done and how. Documenting your requirements, creating diagrams, monitoring performance can help facilitate a seamless transition. In this way, any errors are quickly detected and corrected from the outset.
Scalability is an additional consideration when deciding to outsource or remain in-house. Outsourcing means businesses can scale their resources without investing in further management, capital or infrastructure. This provides an additional cash resource to invest in other areas, possibly leading to further expansion and growth.
Cost of In-house vs Outsourcing
The leading driver for outsourcing is cost cutting. Instead of employing in-house employees (e.g a receptionist) who might not be needed at all times, it is cheaper to use outsourcing as and when needed. By employing in-house staff, the business will need to pay a salary, worker’s compensation, annual or sick leave, superannuation and potentially more. These are all fixed expenses that must be paid. In contrast, outsourcing firms are much cheaper as most operate on a usage-based pricing model where businesses are only charged for what they use (e.g per call taken). Here businesses can convert their fixed costs in variable costs. Furthermore, outsourcing reduces the inherent expenses related to recruitment, hiring and personnel training. These costs are all handled and paid by the outsourcing provider.
In short, outsourcing allows you to engage a provider without long-term commitments, only paying for the job. In contrast, hiring in-house requires long-term commitments that binds a business to fixed salaries and costs.
Time Efficiency Considerations
If done right, outsourcing can create more time. If done poorly, it can consume time.
For example, using a live answering service means that businesses have more time to get the job done rather than getting distracted every hour or minute to pick up the phone. This is rather pertinent if you’re in an industry that doesn’t allow you to stop everything and answer the phone, such as a tradie who is on site conducting works or a doctor who is treating patients. It can be hard juggling the competing tasks that come with running a business…but outsourcing has become a value-add solution that has allows businesses to increase flexibility, while focusing on what they do best, thereby creating a situation where businesses have the freedom to focus on the core competencies that drive growth. However, if outsourcing is not implemented correctly, it can create a hassle for businesses to amend or correct errors. It could also create quality concern issues if not performed to a high standard.
Which is best?
When you’re at a crossroad, selecting between outsourcing or in-house, it is recommended to first evaluate your goals, future plans and business needs. Then evaluate the pros and cons of each option. After all, you want your business to prosper so it is not a decision that should be taken lightly.