How Outsourcing Your Business’ Processes Can Boost Efficiency
Certain aspects of running a business are crucial to keep the company functioning, but hey are not necessarily part of its core value proposition. In these cases, companies can turn to business process management, or BPM, which provides efficiencies beyond what the company could generate on its own.
As a result, companies can improve their value such as by reducing expenses and increasing innovation. Here are a few of the many benefits of having your business processes managed by a third party.
Gain Economies of Scale
By outsourcing a business process such as IT management or technical support, companies can gain the efficiencies of their process managers’ economies of scale.
For example, if a company in New York wants to provide 24/7 technical support, it would be costly to staff that function internally full time. Not only would it require additional employees, but workers on the overnight shifts would likely require a premium in salary. An outsourcing provider, however, could have the scale to have staff around the world to provide better time-zone alignment, which would likely cost less.
Even if the call center was located within the U.S., the business outsourcing provider could still achieve economies of scale in a variety of ways, such as with the technology it uses. Rather than having each small business purchase the technology needed to operate technical support, business process managers could have the same system and divide that cost up amongst its many customers, making it less expensive for everyone involved. These savings can apply to many functions beyond technical support. For example, a study by Sourcing Analytics of ADP’s largest U.S.-based HR Business Process Outsourcing (BPO) clients found that they could reduce overall HR costs by as much as 40%.
Outsource Your Way to Innovation
In addition to gaining scale, companies can also increase their own innovation by turning to an outsourcing provider.
In fact, a survey by Deloitte found that 35% of respondents “already measure the value of innovation in their outsourcing relationships.”
While this may come as a surprise to some who assume outsourcing relationships are static, there is an opportunity to benefit from an outsourcing provider’s own staff and create more of a dynamic relationship.
“Services providers can be well positioned to see opportunities for innovation. Those that deliver services on a regular basis can track ideas across a global client network and spot BPO trends quickly,” writes Mary Lacity, curators’ professor of information systems at the College of Business Administration, University of Missouri-St. Louis, and Leslie Willcocks, professor of work, technology and globalization at the London School of Economics and Political Science, in an article for MIT Sloan Management Review.
So by partnering with outsourcing providers, businesses gain the efficiencies of their partners’ intellectual capital, rather than only being able to innovate based on ideas from its internal staff. Managers of business processes can identify new technologies and processes that would help their clients innovate, and the manager may have the expertise to help the client adapt to these changes as well.
While there are certain aspects of business processes management that can be better handled internally — a payroll company probably would not want to outsource its own payroll, for instance — companies should take a good look at their operations to identify areas that would benefit from the efficiencies of an outsourcing provider or BPM service.
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