Can Outsourcing Help the Private Sector Recover?

Recent news reports have painted a pretty woeful picture when it comes to matters of business and economy and, while it’s safe to say the media can be prone to hyperbole, new data from S&P Global indicates that job cuts and other financially related challenges do indeed look likely to continue for the private sector.

The news is based on the latest composite Purchasing Managers' Index (PMI), which is an index of the prevailing direction of economic trends in the manufacturing and service sectors. Always a number from 0 to 100, a PMI above 50 represents an expansion when compared with the previous month, while a PMI reading under 50 represents a contraction (a reading at 50 indicates no change). The further away from 50, the greater the level of change. ?

Unfortunately for many private companies, August 2023 showed a decrease to 46.8 from 48.6; a decline that surpassed economists' expectations and that is likely to leave the private sector with resource deficits to overcome, as well as perpetrating drastic shifts in the employment landscape.

A downturn in business activity

Perhaps unsurprisingly, business activity in the private sector continues to suffer due to the economic downturn, having recently recorded its largest slump since March 2009 (outside of the COVID-19 pandemic's impact, at least).

Many private sector companies attribute this to several factors combined, including the rising cost of living, lower export demand, and escalating interest rates. Together, these factors have left many consumers struggling to make ends meet, therefore suppressing demand for goods and services, and leading to a rapid slowdown in growth.

Indeed, as many businesses around the UK are finding there’s simply no more wiggle room to raise prices, Jennifer McKeown, the chief global economist at the Capital Economics consultancy, suggests:

?“August’s flash PMIs support [my] view that the eurozone and UK will slip into recession in the third quarter and imply that the US is now barely growing.

“And with output prices still easing gradually, the surveys strongly suggest that we are at or close to the peak in monetary tightening cycles.”

Can outsourcing help?

In short, yes.

Outsourcing services can offer organisations a variety of benefits, particularly when it comes to cost savings (think salaries for personnel, overhead, equipment, use of technology, recruitment costs, and so on).

Other major benefits include the ability outsourcing offers to maintain focus on other core business activities. Working with external service providers means business leaders can channel resources and recruitment efforts into particular departments or skillsets that offer the best return on investment in their target market.

To this end, commonly outsourced services might include things like:

·?????? Business processes and HR

·?????? Finance

·?????? Sales and marketing

·?????? Health and safety

·?????? Operations

·?????? IT and telecoms

As outsourcing has become more common, however, some providers have faced criticism; loss of control, not delivering on promises, negative impact on employee job opportunities, and even data protection and confidentiality risks can all be cons of working with inefficient, inflexible, and ill-prepared managed service providers (MSPs).

It’s important to remember that outsourcing activities is very much multifaceted and context dependent – if the private sector wishes to reap the rewards outsourcing can bring in the coming months, it's vital they enter contracts with MSPs that share their own business ethos, as well as offer agility, collaboration, and transparent pricing structures. ?

A closer look at outsourced IT specifically

An effective IT Managed Service Provider (MSP) can be a valuable asset – especially to businesses wishing to improve services while dealing with resource deficits or job losses.

After all, with an MSP, there’s no need to spend extra money and time recruiting or training for the specialised IT skills many organisations require to thrive in the age of digital transformation. MSPs already have skilled experts working for their organisation and have made it a priority to find exactly the right people for the job, often through industry connections and specialist head-hunters/recruiters.

Additionally, outsourcing allows concerned organisations to enter contracts (e.g., service level agreements) with external third parties, giving organisations much more ability to pull levers on performance - and in a more objective and compelling way - than compared with internal teams.

These days, IT MSPs play a varied role in the success of those they work alongside. Naturally, this involves working on IT strategies and implementation, but it also involves helping to meet wider business goals such as improving efficiency and productivity, providing business insights that inform IT investments, and even easing flexibility and scalability. ?

There are various IT services that may be outsourced, including:

Managed IT Services

Managed IT services can range from?general to?specific, depending on the needs of the organisation and the MSP in question. Common services might include the IT service desk, IT systems and infrastructure management, service integration, monitoring and maintenance of equipment, and network monitoring.?

Cloud Services

Managed cloud service providers take care of various cloud management functions for organisations, as well as offering cloud consultancy on how best to digitally transform the business into cloud services (e.g. offering advice on design, planning, and cloud vendor selection).

Cyber Security

Cyber security is a specialist area, requiring expert security knowledge and a contemporary understanding of the threat landscape. Many organisations choose to outsource their cyber security needs in order to benefit from access to wider skillsets and better tools than are within reach in-house.

The benefits of outsourcing IT during hard times

Managed service providers can offer organisations numerous additional benefits to increase resilience, productivity, and efficiency. These include:??

Cost Effectiveness

Hiring a full team to run any IT department in-house means high costs. For example, an in-house IT service desk would require the business to pay full-time salaries and benefits, as well as taking on increased operational costs, for tens of people, at least.

Additionally, in-house teams that need to upscale quickly are bound to run into candidate shortages, potentially even hiring under-experienced employees due to skills shortages and competitive salaries. Of course, even then, this in-house process can take months to complete and incur considerable recruitment fees in the meantime.

Training new staff also takes up valuable time and resources, significantly eating into budgets and potential revenue while impacting the organisations’ performance, staff morale, and productivity.??

Working with an MSP allows organisations to control costs effectively, since many offer transparent pricing structures which are agreed upon before work begins. Partnering with a provider means businesses only pay for the IT services they need, when they need them, and resources can be easily scaled up or down when necessary.?

There is also no requirement to pay high set-up fees upfront as is often the case when installing internal infrastructure, support, and personnel. The MSP will handle all the technology integration, transitioning, and support for end users, completely removing the headache of sourcing, managing, training, and retaining staff during difficult recruitment periods.

Offering Better Service?

Alongside the obvious cost-saving benefits, outsourcing to a Managed Service Provider facilitates a much higher quality end-user experience.

After all, MSPs already have experience and expertise from supporting similar organisations in the same sector and can cross-pollinate intelligence from different fields and across a varied customer base.?This means that services such as the IT service desk or cyber security are likely to be more efficient and therefore offer higher end-user satisfaction.??

By working with an external IT provider, organisations can also utilise additional, value-added services such as multilingual speakers and around-the-clock support. These services help to enhance user-experience too, along with improving workforce productivity, especially when combined with multiple communication channels (e.g., phone, email, live chat or self service).??

Modern Workplaces

Hard economic times indicate changing expectations from both employers, employees, and customers. Indeed, in recent years, we have witnessed many organisations make a dramatic shift to more flexible, hybrid, and technologically reliant ways of working to compete in the talent market. We’ve also seen many customer-facing services switch to more convenient, digital applications that offer anytime, anywhere services (think banking, retail, entertainment, and so on).

To implement these modern, digitally transformed workplaces, then, it stands to reason that organisations increasingly look to partner with outsourced IT service providers. After all, MSPs have experience and expertise in services such as cloud consultancy, end-user compute strategies, and the associated advanced cyber security measures.?

Remember, to remain competitive, workplaces must be able to offer internal systems and processes that are user-friendly as well as digitally efficient. As much as modern workplaces rely on leveraging and protecting data and implementing new, efficient IT strategies, they’re also vehicles for future-proofing and can, with the right infrastructure in place, help businesses bend and flex along with changing circumstances.

Scott Littlehales

Tel. 07921 387960