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Why Outsourcing Is on the Rise

“Do what you do best and outsource the rest.”

Management consultant Peter Ducker may have said this twenty years ago, but the advice still rings true today. In fact, outsourcing—the hiring of a third party to perform duties that were previously the responsibility of an in-house staff—is about to reach an all-time peak. 

The two main forces behind the rise in outsourcing are the widespread adoption of remote work and the acceleration of digital transformation in businesses. They’ve not only made outsourcing easier, but also more attractive for companies looking to cut costs, serve customers better, and innovate.

The increase in outsourcing

And not just large companies. While outsourcing may have started out as a trend among big, multinational corporations, today, a significant number of small companies outsource their business processes. 

In fact, a 2019 survey of 529 small businesses in the US found that nearly 40% were already outsourcing processes like accounting, IT services, and digital marketing as a way to increase efficiency, tap into specific skills, and free up employees’ time. A 2020 survey by B2B research firm Clutch showed that 80% of small businesses in the US were planning to outsource in 2021. 

Meanwhile, large corporations, many of which had ended outsourcing contracts in the early 2000s in favor of expanding in-house teams, are again turning to external support to meet customers’ demands for faster and more convenient experiences. This is especially true of businesses in fast-growing industries such as retail, health care, and finance.

A 2020 report by global technology services company NTT showed that 45% of global corporations were planning to outsource more work in the months to come.

Why outsourcing is on the rise

As online shopping increases, so does the demand for AI-powered or robotic process automation that ensures customers are supported at all times. As chronic illnesses and viruses rise, so does the demand for telehealth services that enable patients to consult with doctors without leaving home. As more people use smartphones to manage their finances, so does the need for technology that guarantees a secure and risk-free environment for financial operations. 

Most companies aren’t equipped to build these solutions at the speed required to maintain a competitive edge. By outsourcing, they can meet customers’ needs and achieve business goals faster. Google, Basecamp, WhatsApp, and Apple are just a few examples of companies that use outsourcing to manage capacity issues, cut costs, and focus on their core products. 

And while outsourcing is quickly becoming essential to global corporations, it can benefit companies of all sizes and industries. Most companies could gain from reducing labor costs and putting more focus on core projects and activities. By having fewer employees on payroll and relying instead on contractors and external teams for support, they could do more of what they do best while becoming more efficient, more productive, and more profitable.

Tasks most businesses can outsource

Administrative tasks 

Administrative tasks such as coordinating meetings, processing email, onboarding, answering emails, managing documents, and entering manual data into systems are common to all businesses. They’re also the simplest to outsource to a virtual assistant. 

Research 

Tasks such as finding valuable links and stats for content creation, collecting data to inform purchase decisions, filtering news articles for social media reposting, and finding deals on flights and accommodation are easy to outsource to a research or virtual assistant.  

Accounting

While administrative tasks and research are easy to outsource because they don’t require a high level of expertise, accounting is the exact opposite. It’s highly technical, and requires expert knowledge of both legislation and software. Data suggests that small business owners who do their own accounting are insecure: approximately one-third thinks they might be paying too much tax; nearly 60% fail to create a formally documented budget. Not surprisingly, accounting is the business process most commonly outsourced by small businesses in the US, according to a 2019 survey

Design and other image-related tasks

When you’re not an expert in graphic design—the process of creating branding assets such as logos, print materials such as brochures and flyers, and social media images—it shows. The same is true for web design, the process of creating the look and structure of websites. For these projects, and other image-related tasks including photography and videography, it’s best to work with the experts.

Content tasks

Creating clear, concise, and engaging content for emails, blogs, newsletters, and social media requires expertise, attention to detail, impeccable grammar, and time, which is why many companies either outsource all of their copywriting, content marketing, transcription, revising, editing, and translation work, or hire freelancers to tackle specific projects such as the creation of white papers.

Outsourcing is an irreversible trend

Outsourcing enables companies to pay for services only when they need them, which creates more budget flexibility and reduces costs with labor and operating expenses. Outsourcing also helps businesses achieve better, faster results. 

The widespread adoption of remote work and new technologies is driving companies big and small to increase outsourcing. Has your company embarked on this trend? Let us know in the comments below!

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