What is the real cost of outsourcing?

Written by Mark Creighton on 19 February 2019 in Opinion
Opinion

Is outsourcing right for your business? Mark Creighton looks at the impact.

Reading time: 3m 30s.

As the volume has been dialled up on economic uncertainty and with an impending consumer recession, what impact will this have on businesses? 

Uncertainty has far reaching impacts on the cost of doing business; it affects the ability of businesses to access finance, invest, export, and ultimately, grow. As a result, businesses will inevitably consider ways in which to reduce its costs during periods of instability. In my experience, the allure of outsourcing is often too much to ignore for some businesses. 

It’s a common practice and one that has a proven track period of delivering cost savings and efficiencies leading to greater competitive advantages, but what is the long term impact on your workforce? 

Business leaders have always struggled with the double-edged sword of outsourcing. Short-term, cost-effective speed to market is always counterbalanced with the opportunity to sustainably grow a business from within, even if that comes at significant initial investment.  

A failure to educate the community about a specialist outsourced approach, only leads to that resource to operate in a vacuum, where their true value is never realised or felt by your organisation. 

The short-term cost benefits associated with outsourcing, often mask the operational challenges they create for a business in the long term. There are implications for integrating external partners into existing company processes and managing tricky transitions outside of the company’s walls that can have material impact on the quality of an organisation’s delivery to its customers.  

Taking advantage of an outsourced model for growth does require the organisation to understand how best to engage with specialist resource. A failure to educate the community about a specialist outsourced approach, only leads to that resource to operate in a vacuum, where their true value is never realised or felt by your organisation. 

Take for example the rapid growth in the need for data skills across all businesses as a consequence of emerging technology and the value of data to many areas of a business.

While outsourcing accesses scaled specialist data science and analytical talent quickly, it is only valuable if the ‘consumers’ within the broader business are both engaged and equipped to apply that new insight into their roles.

 

The ‘data cul-de-sac’ is compounded both by a lack of understanding of the data opportunity and the business change process that needs to be undertaken to align behaviours across an organisation. 
 
There is however a negative impact that outsourcing disciplines may have on sustainably growing the knowledge and skills within your own business which may become as integral to your organisation’s future success.

If as leaders we have conviction in our long term goals, insourcing new skills - through both re-skilling and new entrant programmes - may be more valuable than driving acceleration in emerging areas through outsourcing. 

It has never been easier to re-skill existing people within a business, through digital-first learning, that runs parallel to an employee’s existing role.



Translating the valuable business context of existing employees into new areas of business need - such as digital, data or professional skills - enables businesses to avoid costly restructuring or redundancy processes. In turn it also creates important continuity and stability within a business’ community.  

‘Growing your talent’ has also become a far more cost efficient opportunity, with companies that currently contribute to the Apprenticeship Levy, eligible to fund new entrants into their business on learning programmes that meet new and emerging needs within their business.

Unlike those new entrants from further education backgrounds, the combination of structured learning alongside work experience, enables this new talent to be more valuable to a business far faster. 

While ‘growing your own’ has been a long held adage in business, it has come with both a price tag and a slower cycle of business return. A new generation of learning technology is enabling the development of new skills within an organisation which allows businesses to be more selective about whether to outsource and mitigate the ‘true’ cost it may burden an organisation with.

During challenging times, it can be tempting but take the time to think through what your business needs. Not just in the short term but also in the long term does the short term cost savings outweigh the long term benefits of an engaged, inspired and knowledgeable workforce. 

 

About the author

Mark Creighton is CEO of Avado.

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