Factors that Determine Functions to Outsource

As a company decision maker, you're always looking for ways to drive growth, increase efficiency and cut costs. Outsourcing has become a popular strategy to achieve these goals. But with so many functions to consider, how do you decide which ones to outsource? In this article, we'll walk you through the key factors that should guide your outsourcing decisions.

At Cambria, we have extensive experience helping businesses like yours navigate the outsourcing landscape. The Philippines offers a wage advantage compared to most emerging IT-BPM centers. This cost-effectiveness paired with our deep expertise has allowed us to deliver successful outcomes for our clients, such as the Cornestech Order Tracking System. By leveraging Angular and ASP.NET Core, we developed a web application that streamlined order tracking and report generation, resulting in increased on-time delivery and improved operational efficiency.

Understanding the Benefits of Outsourcing

Infographic highlighting key benefits of outsourcing for businesses such as cost savings and expertise

Before we dive into the factors, let's recap the benefits of outsourcing. By entrusting specific tasks or processes to external providers, you can:

Focus internal resources on core competencies
Tap into specialized expertiseand capabilities
Reduce costs and improve operational efficiency
Scale operations more easily to adapt to market changes

Outsourcing has evolved from a simple cost-cutting measure to a strategic tool that can help you gain a competitive edge. By partnering with reliable, experienced providers, you can leverage their knowledge and best practices to drive innovation and enhance your overall business performance. It's good to note that the Philippine BPO industry's revenueincreased 10.3% to $32.5 billion in 2022.

Key Factors to Consider When Outsourcing

1. Align with Your Business Goals

The first factor to consider when determining which functions to outsource is how well they align with your overall business goals. Ask yourself:

Which functions are critical to your core competencies and competitive advantage?
Which functions are non-core and can be effectively outsourced?
How will outsourcing certain functions impact your ability to achieve your business objectives?

Businessman reviewing business goals on a laptop to determine outsourcing functions for proper alignment

In our work with TBS Global, we developed a web application using ASP technology that launched successfully with high security and scalability. End-user feedback indicated enhanced productivity and efficiency gains compared to previous systems, demonstrating the importance of aligning outsourcing decisions with business goals.

2. Evaluate the Cost-Benefit Ratio

Cost often drives outsourcing decisions. But it's important to look beyond immediate cost savings and consider the long-term financial impact. Evaluate factors such as:

Vendor pricing models and any hidden costs
Potential savings in infrastructure, technology and personnel expenses
The opportunity cost of not outsourcing (e.g., missed opportunities for growth or innovation)

By conducting a thorough cost-benefit analysis, you can make informed decisions that optimize both quality and value for money. In fact, a procurement transformation done correctly can yield an initial cost reduction of about 15 percent, which translates to a bottom-line improvement of roughly 1.5 percent.

3. Assess the Expertise and Reliability of Service Providers

When outsourcing functions, you're entrusting a critical part of your business to an external partner. It's crucial to assess the expertise and reliability of potential service providers. Look for:

Proven track record and industry experience
Relevant certifications and qualifications
Client testimonials and case studies demonstrating their capabilities
Robust security measures and data protection protocols

Choose a service provider that aligns with your company's values and can consistently deliver high-quality solutions. Keep in mind that BPO providers have advantages in effecting successful automation initiatives , including economies of scale, large volumes of transactional data and global access to digital talent like software engineers and data scientists.

Our long-standing partnership with Otsuka is a testament to our expertise and reliability. By developing a mobile application using C#, Xamarin and SQL Server, we enabled efficient survey data collection from doctors for marketing and commission purposes. The native app performance across platforms and secure survey data storage led to increased survey completion rates compared to previous methods, providing richer marketing insights for our client.

4. Consider the Impact on Your Company Culture

Outsourcing can impact your company culture, particularly if it involves functions traditionally handled in-house. Consider:

How will outsourcing affect your employees and their morale?
Will there be any communication or collaboration challenges with the outsourced team?
How can you ensure a smooth transition and maintain a cohesive company culture?

Look for service providers with a compatible culture and values. Establish clear communication channels to foster a strong partnership.

Common Functions to Outsource

Now that you understand the key factors to consider, let's explore some common functions companies often outsource:

Information Technology (IT) Services

IT is one of the most frequently outsourced functions. By partnering with experienced IT service providers, you can access advanced technologies, enhance security and scale your IT infrastructure cost-effectively. Demand for IT services is expected to remain high across all verticals like Banking, Financial Services, Insurance (BFSI), Manufacturing, Telecom/Hi-Tech, Healthcare and others.

Our work with Bertelsmann showcases our IT outsourcing capabilities. We developed a .NET web portal that enabled high-volume certificate uploads with robust file handling and processing. The automated validation reduced turnaround times, while the user-friendly interface streamlined onboarding efforts, increasing adoption rates.
Customer Support

Outsourcing customer support can help you provide 24/7 assistance, handle higher volumes of inquiries and improve customer satisfaction. Customer Relationship Management (CRM) services have high demand in Government, medium demand in most other verticals and low demand in Manufacturing. With the right outsourcing partner, you can deliver exceptional support while freeing up your internal resources.
Human Resources (HR)

HR functions such as recruitment, payroll processing and benefits administration can be time-consuming and complex. Outsourcing HR can streamline these processes, ensure compliance with labor laws and give you access to specialized HR expertise.

Making the Right Outsourcing Decision

Outsourcing can be a game-changer for your business, but it's essential to approach it strategically. By carefully considering the factors outlined in this article and choosing the right functions to outsource, you can maximize the benefits and minimize the risks.

Remember, outsourcing is not a one-size-fits-all solution. What works for one company may not work for another. Take the time to evaluate your unique business needs, goals and culture to make the best outsourcing decisions for your organization. Interestingly, in research of almost 50 global business services (GBS) organizations, more than 90% report that they had effectively scaled up the remote-delivery model , with virtually no loss of productivity and without harming client-service experience or employee experience.

At Cambria, we understand the importance of strategic outsourcing. Our experience in delivering successful outsourcing projects, such as the ECO-X digital technology platform for logistics, demonstrates our ability to navigate the complex landscape of outsourcing. By leveraging C# and ASP.NET Core's performance optimizations and seamlessly integrating with MySQL databases, we created a platform that enhanced logistics efficiency and drove customer onboarding.

This article is part of the Outsourcing series. Read more on how we craft tailored Outsourcing solutions - driving efficient growth, hassle-free:

Frequently Ask Questions (FAQ)

How can I ensure the quality of outsourced services?

To ensure the quality of outsourced services, establish clear performance metrics and service level agreements (SLAs) in your contract. Regularly monitor and assess the provider's performance and maintain open communication to promptly address any issues.

What are the potential risks of outsourcing?

Some potential risks of outsourcing include loss of control over the outsourced function, data security concerns and cultural differences. Mitigate these risks by thoroughly vetting service providers, establishing robust contracts, implementing strict security protocols and fostering strong partnerships.

How do I determine if a function is core or non-core?

Core functions directly contribute to your unique value proposition and competitive advantage. They are essential to your success. Non-core functions, while necessary, do not significantly differentiate your business and can be effectively outsourced.

Can outsourcing help my business scale?

Yes, outsourcing can provide the flexibility and scalability to help your business adapt to changing market conditions. By partnering with external providers, you can quickly access additional resources and expertise as needed to scale your operations.

How can I ensure a smooth transition when outsourcing?

To ensure a smooth transition, develop a detailed plan outlining the steps, timelines and responsibilities of both your team and the outsourced provider. Provide comprehensive documentation, training and support and maintain open communication throughout the process.

Elevate Your Business with Cambria's Outsourcing Solutions

As a company decision maker, you understand the importance of driving growth, maximizing efficiency and staying competitive. Cambria is here to help you achieve those goals through our outsourcing solutions. With 40 years of experience, we offer reliable, scalable and cost-effective services that align with your business objectives. From software development to customer support, our expert teams deliver high-quality solutions that streamline your operations and provide a competitive edge. The IT-BPM industry in the Philippinesemployed 1.7 million people in 2023, an increase of over 8% from 1.57 million in the previous year,attesting to the country's strength in IT outsourcing. Trust Cambria as your outsourcing partner and experience the benefits of increased productivity, reduced costs and enhanced focus on your core competencies.Contact us todayto learn more about how our outsourcing solutions can elevate your business to new heights.

What Factors Should Determine Which Functions to Outsource?

Understanding the Benefits of Outsourcing