Outsourcing evolution: From cost-cutting solution to strategic partnership

This article is a submission by TechSpeed. TechSpeed is an innovative BPO and data processing solutions provider that employs a client-centric approach to deliver telecommunications technologies, BPO solutions, data entry services, and industry expertise.

We tend to think of outsourcing as a cost-cutting measure. And it is. Outsourcing non-core business activities can significantly reduce what you spend on hiring, labor, and resources.

But we are in the midst of an outsourcing evolution. Today, a growing number of businesses are changing the way they think about outsourcing. 

Increasingly, businesses are coming to view outsourcing as a long-term strategy for enhancing business operations.

The right outsourcing partnership can provide access to global talent, specialized skills, and rapidly advancing technology while giving your in-house team the freedom and flexibility to focus on core business activities.

There’s a lot more to be gained than just cost savings.

Today, companies view Business Process Outsourcing (BPO) not just as a cost-saving measure but as a strategic partnership that can drive innovation, facilitate digital transformation, and accelerate growth.

So, what’s behind this change in thinking? What’s behind the outsourcing evolution? And why is outsourcing becoming a more permanent strategic solution for so many businesses?

Below, we’ll take a closer look at how our perspectives on this practice have changed while casting one eye on the future of BPO.

Before the outsourcing evolution: Cost-cutting and efficiency

For most of its history, the concept of outsourcing has been synonymous with cost-cutting. Traditionally, the top priority for outsourcing companies was to bypass expenses like:

• Hiring
• Onboarding
• Acquisition of physical assets
• Implementation of new technology

In short, the primary motivation for outsourcing has historically been budgetary. Outsourcing solutions offer ways for companies to do more with less—a lean organizational approach to scaling, growing, or both. 

While businesses are increasingly widening their view of outsourcing, it remains a valid and preferred method for lowering costs.

However, trends are revealing a whole new spectrum of strategic benefits. In addition to cost-cutting, strong BPO partnerships can make your business more nimble, more efficient, and more innovative.

The outsourcing evolution: Strategic long-term partnership

Outsourcing is now a linchpin of the economy and a major contributor to the stasis of our global business ecosystem. As a result, companies today have far loftier expectations from their outsourcing partnerships.

It is no longer merely transactional. It isn’t enough for an outsourcing provider to offer cost-cutting measures by handling back-office tasks or data management services. These faculties are important. 

But they must be part of a deeper partnership driven by a shared commitment to long-term strategic goals.

What do we mean by this? 

5 forces driving the outsourcing evolution from transaction to strategic

Let’s take a closer look at some of the driving forces behind the evolution of outsourcing:

1. Focus on core competencies

The single most powerful driver of the outsourcing evolution–even more so than cost-cutting–is the freedom and flexibility this business model can create for your in-house team.

According to Deloitte’s White Paper on Outsourcing and Shared Services, 65% of all businesses rely on outsourcing for non-core business processes so that their in-house personnel can focus on core competencies. 

This strategic balance of operations can provide the leeway for your in-house team to work with greater freedom, creativity, and energy. Ultimately, this type of working atmosphere leads to higher morale, better efficiency, and greater innovation. 

2. Digital transformation

Technology is evolving rapidly. Innovations like AI, machine learning, and advanced data analytics are transforming the business landscape around us.

However, implementing new technology can be costly, disruptive, and risky. 

Clutch’s survey revealed that businesses have grown increasingly comfortable leaning on BPO partnerships to access emergent technology. Advancing technology is helping to drive the outsourcing evolution.

 37% of businesses surveyed say they outsource IT services, the same percentage outsource accounting processes, and 34% indicate that they partner with third-party vendors on digital marketing. 

These partnerships are about much more than cutting costs.

The right BPO partnership can help place your business on the leading edge without taking on the risk, operational burden, and organizational disruption of implementation.

3. Access to global talent

Employers across a wide variety of industries have struggled to navigate talent shortages in a costly and unpredictable post-pandemic labor economy.

Moreover, the competition for personnel with certain specialized skill sets has become increasingly fierce among would-be employers.

The outsourcing evolution is at least partially a response to that struggle.

Going back to Deloitte’s White Paper, 33% of outsourcing businesses cite “critical business needs” as the top driver of outsourcing. 26% of respondents also note that outsourcing creates “access to intellectual capital.”

BPO providers offer access to a global talent pool, enabling businesses to tap into a diverse range of expertise and skills that might not be available locally.

It allows companies to scale quickly and adapt to changing market demands with minimal risk.

4. Scalability 

Speaking of scaling, Deloitte also notes that 33% of businesses called “global scalability” the top benefit of outsourcing.

A strategic BPO partnership provides access to expanded labor pools, resources, facilities, infrastructure, and technology without the many steps and costs involved in procuring these things in-house. 

As a result, a sustained and ongoing BPO partnership can provide your business with the ability to scale operations up or down to meet changes in demand, new project requirements, shifting costs, or broader economic realities.

The outsourcing evolution is steeped in this desire to grow while insulating against an extremely risky operating environment. 

Many businesses are choosing long-term partnerships with trustworthy BPO providers because this allows them to respond to any operating environment with maximum agility and minimal risk.

5. Outsourcing as the ultimate small businesses and start-up hack

It was conventional at one time to think of outsourcing as a solution reserved for large companies with massive production demands. But today, outsourcing plays an increasingly specialized role for startups and small businesses.

Small businesses must compete in increasingly fragmented markets with limited resources, personnel, and geographical reach. 

Outsourcing non-core activities to the right long-term partner can provide access to specialized skills, technology, and scalability that simply wouldn’t otherwise be attainable.

This gives small and growing businesses an opportunity to focus inward and nurture core skill sets.

One of the best entrepreneurial hacks is knowing how to start and grow a business while using outsourced teams. This strategy enables expansion and raises profit margins with minimal startup cost or risk.

The continuing outsourcing evolution: Collaborative innovation

The continuing evolution of outsourcing will likely be characterized by even deeper collaboration between clients and providers.

Top BPO providers are striving to play a long-term strategic role in helping organizations navigate the complexities of our current economy. This includes:

• Leveraging emergent technology and specialized skill sets
• Handling sensitive data needs
• Expanding access to the global talent pool

As companies increasingly view BPO providers as strategic partners, we will likely see greater emphasis on partnership features like trust, transparency, and mutual growth.