With an eye on revenue and enhancing core business processes, companies are pursuing outsourcing strategies for many facets of their business. Two popular models are business process outsourcing (BPO) for the back office accounting function and IT outsourcing. Many small companies and emerging businesses don’t require full-time back office accounting and IT personnel, while larger companies can often benefit from a hybrid approach of retaining some functions in house while outsourcing others.
Outsourcing is not very different from another common function that companies are familiar with such as legal counsel. Many small organizations do not maintain internal legal counsel, instead consulting with outside attorneys to fill critical needs. As companies grow, they may hire general counsel, but look outside the company for specialization and complex needs.
The legal model is similar to a common outsourcing structure. If you are a small company, you require an IT presence, but if a full-time employee is hired, it is difficult to get optimal value from the function. Outsourcing can provide the accurate level of coverage at a fraction of the cost. As your business grows, it may make sense to move some functions internally, potentially implementing a management layer for vendors, and developing a co-managed solution.
Technology is very complex and one or two people within a department rarely have a full grasp of available technologies, either from a strategy or implementation perspective. Outsourcing provides access to a significant depth of resources and experience that is difficult to replicate with in-house personnel, resulting in more efficient processes and realizing more value from your investments. The following are five benefits of BPO or IT outsourcing:
Staying up to date on trends, technology and risk – Implementing new technology helps your company operate more efficiently while securing your assets. Outsourcing can integrate modern tools to reduce risk, optimize business processes and monitor applicable regulatory changes. The strategy also reduces concerns surrounding the hire, train and maintain staffing cycle and potentially losing key personnel. It is an insurance policy in many cases against knowledge and resources leaving your company. If you rely on a single individual, and they leave the company, their knowledge of your systems and processes goes with them.
Outsourcing also provides critical business continuity and increased disaster recovery capabilities. Many companies do not have the resources for around the clock support, while outsourcing can provide 24/7 monitoring at a fraction of the cost of internal personnel.
The ability to focus on your core business – As mentioned earlier, organizations are increasingly focusing on their key functions and what drives revenue. With that in mind, companies are moving more to an outsourcing dynamic to focus on their core business as other components become more of a commodity. An outsourcing arrangement allows you to concentrate on what your business is good at, while support functions are managed and maintained by an experienced vendor.
A better understanding of cost and realizing more value from your technology functions – Small companies and startups often do not have the need or resources for full-time back office and IT support personnel. An outsourcing strategy can help ensure that your resources are properly aligned, and costs are optimized. Some companies are overspending on IT, while others are underspending, with both scenarios presenting potentially dangerous consequences. Outsourcing allows your company to understand the true value of your back office and IT operations and deploy the proper level of support.
Enhance and leverage business reporting – Updated technology and deeper resources can provide a greater amount of data and analytics to make better business decisions. Many reporting processes can also be automated, reducing the strain on internal personnel.
Extend or contract resources easily – Outsourcing strategies are inherently flexible, with the ability to adjust your level of support depending on your needs. The function can scale as your business grows, or if you have increased seasonal demand. Resources are available when and where you need them, providing a much higher level of agility than hiring new internal employees, bringing them up to speed and requiring immediate results.
Companies often do a good job at defining a technology and back office framework, but they do not have the resources for related processes, platforms or systems. Gaps or over-coverage often exist with internal teams, with efficiency and risk management processes ultimately suffering.
A helpful exercise is to outline your overall business practices and determining how back office and IT services support the business. Whether you choose to outsource these functions, or they remain in house, this is a healthy exercise to perform periodically to understand whether your core operations are receiving the level of support they require.
BPO or outsourcing IT applications, infrastructure, and support are strategic business decisions. Some support functions, such as chief information officer (CIO) services, are important, but many companies are not capable of filling that need internally. Developing an outsourcing or co-sourcing strategy with a third party can strengthen processes and security measures while helping you realize more value from your investments and focus on your core business processes.
For more information on McGladrey’s IT outsourcing offerings check out our website, contact McGladrey’s technology consulting professionals at 800.274.3978 or email us.