Operational Efficiency in Outsourcing: Strategies and Insights

If you’re looking for long-term success in your business, then operational efficiency is not just desirable, but a necessary attribute. It‘s no secret that it drives productivity, profitability, and growth. One strategy that has proven effective in enhancing operational efficiency is outsourcing. And guess what? Outsourcing is a tried-and-true strategy to amp up this efficiency.

In a nutshell, outsourcing is all about handing over certain business tasks or operations to external agencies or third parties. It’s like saying, “You’re the expert in this, why don’t you handle it?” This way, businesses can concentrate on what they do best while also enjoying lower operational costs and improved service levels.

The potential of outsourcing to improve operational efficiency is immense. The benefits are manifold, from cost savings to access to global talent and expertise. However, achieving these benefits requires a strategic approach, careful planning, diligent execution, and looking for the right agency to do so.

In this article, we will explore the link between outsourcing and operational efficiency. We will delve into the benefits that improved operational efficiency can bring to a business and how outsourcing can help achieve these benefits. We will also discuss real-life examples of businesses that have successfully improved their operational efficiency through outsourcing.

The Difference Between Outsourcing Industries

There are several types of outsourcing, each with its own set of benefits and considerations. Here are a few of the most common ones:

Business Process Outsourcing (BPO)

This involves contracting non-primary business activities and functions to a third-party provider. BPO services include payroll, human resources (HR), accounting, and customer/call center relations.

Knowledge Process Outsourcing (KPO)

KPO is a subset of BPO. Companies use KPO when they’re looking for specialised knowledge and expertise. Services include research, data analysis, and technical support.

Information Technology Outsourcing (ITO)

This is perhaps what most people think of when they hear the term “outsourcing”. ITO involves outsourcing computer or Internet related work, such as programming, to other companies. It is also known as IT Enabled Services (ITES) Outsourcing.

This strategy of hiring employees outside the US or Australia has been an effective business venture for years now. Looking at the most recent data, the outsourcing industry has seen significant growth since 2023. According to Grand View Research , the global business process outsourcing market was valued at US $280.64 billion in 2023 and is projected to grow at a Compound Annual Growth Rate (CAGR) of 9.4% from 2023 to 2030.

In terms of specific regions, the outsourcing industry in the Philippines is expected to thrive, with projections indicating the industry is poised to achieve its goal of 1.7 million full-time employees (FTEs) and US$35.9 billion in revenue by 2023.

The Link Between Operational Efficiency in Outsourcing and Its Benefits

As we have discussed previously, one of the main reasons companies are able to grow in size and profit is through the cost-effective nature of outsourcing. When businesses are able to focus on core operations, they have more time on their hands to plan and make decisions they often had to push back or struggle with due to the lack of manpower, time, and financial resources. Due to currency differences, outsourcing to different regions and countries tends to be a more profitable venture.?

But outside of cost-effectivity, what other factors contribute to the operational efficiency in outsourcing non-core operations?

Access to Global Talent and Expertise

Outsourcing opens up a global pool of talent and expertise. Companies can leverage the skills and knowledge of specialists worldwide through an agency. Agencies have standards and metrics in place to make sure each client and their employees mesh well together. This ensures high-quality output and innovative solutions.?

Access to Industry Best Practices

Outsourcing partners often bring industry best practices and deep domain expertise to the table. They stay up-to-date with the latest trends, technologies, and regulatory changes in their field, ensuring that your business benefits from this knowledge. This leads to companies' improved operational efficiency, as your business can leverage these best practices without investing time and resources to stay current with industry developments.

Diversity and Exploration of Other Cultures

Working with people from different cultures requires an open-minded attitude. And no business will grow if they don’t have the mindset to draw inspiration from outside their bubble. When companies outsource, they often work with teams from different cultural backgrounds. This diversity can lead to innovative solutions and creative problem-solving.?

However, cultural differences in outsourcing can complicate working across the globe. Misunderstandings rooted in contrasting cultural norms can lead to communication breakdowns, process failures, and unsatisfactory results.?

Thankfully, agencies like The Outsourcer have done the legwork for you. Our team consists of Filipinos of the highest standards. You can rest assured that our team members are globally competitive and mesh well with the American and Australian company culture.?

Streamlined Business Processes

When non-core tasks are outsourced, internal teams can focus on their areas of expertise, leading to more efficient and effective processes. This can result in faster turnaround times, improved quality of work, and increased productivity. For example, outsourcing data entry tasks can free up time for your team to focus on data analysis and interpretation, leading to more informed business decisions.

Increased Market Penetration

According to a report by Statista , the outsourcing penetration rate in the United States stood at 66% in 2019. And this was before the pandemic peaked and everyone was working from home.?

While companies were shuffling how to deal with the change in operations, US companies that were already outsourcing only saw a rise in growth and revenue. Now imagine what this would’ve meant for your business. By outsourcing tasks such as market research, customer service, and sales, businesses can reach new markets and customers more effectively.

Business Continuity and Disaster Recovery

Outsourcing can also contribute to business continuity and disaster recovery. Outsourcing partners often have robust systems and processes in place to ensure uninterrupted service.?

This can be particularly beneficial in areas such as IT and customer service, where downtime can have significant business impacts. In the event of a disaster or disruption, your outsourcing partner can ensure that services continue with minimal interruption, protecting your business from potential losses.

Enhanced Competitive Advantage

According to Deloitte’s Global Outsourcing Survey, 92% of G2000 companies use IT outsourcing. Why spend resources figuring out a field that you’re not familiar with such as digital marketing, video editing, or copywriting, when you can reach out to an outsourcing agency that already has these talents ??

By leveraging outsourcing partners' skills, technologies, and processes, companies can deliver superior products and services. This can differentiate your business from competitors and position it as a leader in its field.

Top Outsourced Operations?

Now that we know the benefits let’s discuss the most outsourced operations or roles:

Customer Support

One of the most outsourced operations by date. According to a report from CustomerThink , American corporations routinely outsource customer service and IT jobs offshore in which small businesses outsource customer support by 24%. Companies often outsource customer support to specialised firms that can provide 24/7 service and handle high volumes of inquiries.?

This allows companies to maintain a constant line of communication with their customers, ensuring that their needs and concerns are addressed promptly and efficiently. Outsourcing customer support also enables companies to handle customer inquiries across different time zones, languages, and platforms.

IT Services

Another leading industry that are filled with professionals across the globe. According to a report from Fortunly , the biggest share of outsourced IT work comes in the form of cybersecurity (81%), followed by app and software development (79%) and IT infrastructure services (77%).

IT services encompass a wide range of functions, including IT support, cloud services, software development, website maintenance, and cybersecurity. By outsourcing these services, companies can leverage the expertise of specialised IT firms to manage and optimise their IT infrastructure. This allows them to stay up-to-date with the latest technological advancements, protect their digital assets, and ensure the smooth operation of their IT systems.

Search Engine Optimisation and Search Engine Marketing?

Both Search Engine Optimsation (SEO) and Search Engine Marketing (SEM) are some of the most popular outsourced tasks in today’s market. When someone looks for a product, service, or information online, Google reads through thousands of texts, images, and information from various websites and recommends those sites in their search results.?

If Google doesn’t easily pick up your website or platform, you’re losing hundreds or thousands of potential customers.?

SEM and SEO require experts who have gone through trials and errors to get the best results for clients. Instead of spending the resources needed for a strategy, consult experts offering a more cost-effective rate due to how advantageous the US dollar is compared to other currencies.?

Human Resources:?

HR operations require a lot of work and excellent people. Thankfully, specialised agencies like us, The Outsourcer, can do administration, background checks, payroll processing, and recruitment for your business.?

By outsourcing these tasks, companies can streamline their HR processes both locally and offshore, reduce administrative burdens, and ensure compliance with labor laws and regulations. It also allows them to access a larger talent pool and leverage the expertise of specialised HR firms.

Accounting and Finance

Because of the internet, many Filipinos are already skilled at bookkeeping , tax preparation, and financial auditing for accounting firms in the American and Australian markets. This allows them to ensure the accuracy and compliance of their financial records, optimise their tax strategies, and gain insights into their financial performance.

Marketing and Sales

Be it brick-and-mortar or digital marketing , this field is complex and requires people that specialises in this. Buying and selling a product or service is universal, so wouldn’t it make sense to have access to experts in marketing across the border who knows your target demographic and culture??

When companies outsource their marketing tasks, which include market research, advertising, public relations, and sales, they are able to tap into the specialised expertise and resources of marketing agencies. This strategic move not only enhances their brand visibility but also helps them reach their target audience more effectively, driving sales.?

Furthermore, by partnering with agencies like The Outsourcer, companies can stay abreast of the latest marketing trends and strategies, ensuring their marketing efforts remain relevant and impactful.

Logistics and Supply Chain Management:?

With the rise of the eCommerce industry, many companies have outsourced their logistics operations to third-party logistics providers (3PLs) to manage transportation, warehousing, and inventory management. In fact, a Gartner report said that 66% of logistic leaders have increased their budget for outsourced logistics operations.?

Additionally, the reason why they have such a positive outlook in improving their operational efficiency in outsourcing was because of improving or updating technology (37%), cost reduction or optimisation (31%), and increasing customer satisfaction (29%), as their main focus areas.

Data Entry?

Outsourcing data entry can be a cost-effective way to manage large volumes of data. It allows companies to ensure the accuracy and consistency of their data, reduce administrative burdens, and focus on data analysis and decision-making. It also enables them to leverage the expertise of specialised data entry firms to handle complex data entry tasks.

Conclusion on Operational Efficiency in Outsourcing

In conclusion, outsourcing offers numerous benefits beyond cost savings. It can lead to streamlined business processes, access to industry best practices, improved business continuity, increased market penetration, and enhanced competitive advantage. However, to realise these benefits, it's important to choose the right outsourcing partner and manage the relationship effectively.