How To Calculate Outsourcing Cost?

In this cutting-edge marketplace, more and more companies are aiming to make it big in the industries by serving their clients with the best and having a great online presence. While there are many professionals, ready to work full-time for any company to offer them IT services, not every company is ready to bear the cost of an in-house team. This is where the Outsourcing services come into the picture. This can apply to a wide range of industries, and positions vary from technical support to accounting and data entry. One thing to keep in mind when outsourcing is the cost involved in the whole process. It makes sense to go smart by calculating the overall cost of outsourcing the services. So how do you do it? Here is a blog where we’ll talk everything about calculating the outsourcing cost.

What is IT Outsourcing?

Before we jump to know the cost of outsourcing and how to calculate it, let’s have an understanding of the outsourcing itself.

If you are a small business or start-up, having limited finances to spend on anything, you would want to save every penny you can. One reason more and more businesses are choosing to outsource is the cost associated with hiring an outsourced IT team. An outsourcing company will have a team of highly trained and experienced professionals, who will offer the same IT services but at a fraction of the cost. according to professionals in the industry, one can save over 80 percent by outsourcing. These professionals will work in collaboration with your in-house team or as your virtual staff or virtual worker.

For example, if you want to promote your business on Google, you would want to hire a team of digital marketing professionals, but since hiring an in-house team can be a relatively costly affair, it makes sense to outsource the task to someone offering outsourcing services.

Types of outsourcing services

Unlike the common belief, outsourcing services are not limited to a particular industry or a field of expertise. There are different types of outsourcing services that include:

IT functions –There are various types of IT services that a modern business might need to keep the ball rolling. From network management to branding online and mobile app or website development to data warehousing, there are various types of IT services that a business can outsource to keep up with industry trends.

Business processes and HR – Not every small business is efficient enough to have a team of HR professionals, but since it is a very important part of the business operations, it makes sense to save some money by outsourcing this service to a professional team and get access to specialist skills, but you only pay when you need to use them.

Finance – Many modern businesses are now saving some money by opting to outsource finance services like tax paying, financial auditing, bookkeeping, invoicing, etc.

Sales and marketing – There are many outsourcing services that now offer consulting services to handle marketing communications. Smaller businesses, or those in specialized markets, can also outsource sales to specialist agencies.

Calculating the cost of outsourcing

Whether you are running a small business and would like to take your business to the next level or simply need a skill that is missing internally, outsourcing is the most concrete and easy solution to put in place. It can help get the best technical or non-technical support from professionals while controlling the cost and increasing the profits of the company. To calculate the overall cost of outsourcing, here are some tips you can follow.

Define the Business function you want to outsource – One of the most important things that you need to know here is to determine the specific business functions that you are considering to outsource. This will help calculate the overall cost of outsourcing as the cost depends on the types of services you want to outsource. The more services you want to outsource, the higher will be your investment. For example, if you need digital marketing services and web development, the cost will be higher than only hiring a professional agency for on-page SEO services or link-building.

Calculate in-house costs that could be avoided by outsourcing – When you know the type of service you want to outsource, the next comes to calculate the costs your organization would avoid from outsourcing. This will help you know the savings you are making by outsourcing the services. This can be done by listing down direct costs (supplies, salaries, equipment, etc.). Apart from this, it is also important to include indirect costs so you can remove variables you don't need to pay for.

Calculate your total costs of outsourcing – This is a very important step to calculate the overall cost of outsourcing. Get quotes from different service providers and have a good understanding of how they work. Some companies will work on a dedicated resource basis while others can offer hourly (flexible) billing. For a small agency looking for affordable outsourcing services, opting for hourly billing can be a good choice as this allows you to pay for the time you have used their services. On the other hand, dedicated resource-based hiring involves paying for the cost of a resource or a team of professionals who will work on your project. This kind of outsourcing is relatively expensive.

Deduct outsourcing cost from your in-house costs – The next step you want to take is to calculate the overall cost of outsourcing services and to know the savings you are making by outsourcing services. When the result shows that outsourcing significantly reduces your cost, then you can continue with the outsourcing. So, to get the result, you can subtract the total costs of outsourcing from the in-house costs. This helps justify your decision to outsource to a third party.

Conclusion

When you are living in this modern world where competition is fierce, it makes sense to cope with the growing and changing trends. While keeping a tab on the cost is also very important, it makes sense to go with outsourcing service providers as their services are relatively affordable than hiring an in-house team of professionals. Of course, it is not the cheapest choice you can make, but doing it the right way allows you to actually save money. So, start collecting quotes from different service providers in the industry to have a good understanding of the money you need to spend. Also, make sure to compare the quotes by the skills and expertise they provide, you can make your choice based on these.

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