More and more small and medium enterprises (SMEs) are tapping outsourcing companies for their essential functions. The Philippines’ Department of Trade and Industry projected the Information Technology-Business Process Outsourcing (IT-BPO) industry to worth $250 billion by 2022. A 2017 report identifies economics, geopolitics, and globalization as the three major global trends that shaped the BPO phenomenon in Asian countries. This is largely due to the increasingly fierce competition in global markets, resulting in a greater pressure on companies to efficiently run operations in a cost-effective and strategic manner.
This can put SMEs at a disadvantage for the following reasons:
- The DIY route can get overwhelming. A lot of SME owners tend to wear multiple hats, covering various time-consuming tasks (often operational).
- A smaller business likely means a limited skillset available. This can hinder business growth and development. Matching a specific job to the most suitable individual maximizes their talent to benefit the business.
- Time mismanagement. An Entrepreneur article listed accounting as the most time-consuming task, followed by banking, artwork/design, social media, and copy editing. These aren’t considered menial jobs, with some becoming recognized as a specialty trade. It is not a foreign concept that poorly executed tasks due to time constraints often lead to errors.
Outsourcing benefits for SMEs
Streamlining business processes and functions through outsourcing greatly benefits SMEs and addresses the potentially problematic situations we’ve listed above.
- Lower overhead costs. Outsourcing allows SMEs to control their capital costs, avoiding large expenditures and direct the money instead to revenue-producing operations. Labor costs are reduced as well, and SMEs have the advantage of hiring professionals for an agreed-upon period of time.
- Scale your business. A good example is managed operations. This is a type of offshore process wherein businesses can exercise optimal control of costs, strategic control of operations, increase the level of performance and service quality, and focus on long-term growth with the capability to meet larger operational demands.
- Increase efficiency. By outsourcing non-core but important operational tasks, SMEs can focus on the core competencies of the business. This also reduces the risk for error often attributed to lack of training or mismatch of employee skill set.
- Higher retention rates. This is an overlooked aspect of a financially thriving business. SMEs that outsource will ensure their in-house staff can play to their strengths, maximize their talent, work passionately on what they love doing, and enjoy the benefits.
- Outsourcing is where the sales are. In a Wall Street Journal report, companies grow much faster outside the U.S. than at home. It is a comparative advantage: while it is true that some U.S. companies’ production happens overseas due to lower labor costs, U.S. consumers, in turn, get cheaper prices.