Which Corporate Functions Can You Outsource?

Companies outsource for all sorts of different reasons. Forbes cites six possible reasons for outsourcing including: To promote greater growth, to maintain flexibility, to exploit industry expertise, to increase brand loyalty, and to fulfil compliance requirements.

We’d argue that the sixth reason, to focus on core competencies, is the most apt reason for outsourcing. Apple is one company that outsources (production) to focus on core competencies (design).

In this week’s article we will be discussing the different types of corporate functions that can be outsourced to allow your company to focus more on certain competencies. Functions include: Accounting, payroll, marketing, content creation, lead generation, customer service, IT, manufacturing, shipping and logistics, R&D, HR, recruiting, and legal services.

Background

The prevailing business strategy of the post-WWII era primarily revolved around diversification of corporate bases, vertical integration thereafter, and economies of scale. However, due to limited flexibility, companies began outsourcing to promote flexibility and a more efficient management structure in the 1980s.

According to NC State University, “Outsourcing was not formally identified as a business strategy until 1989… However, most organizations were not totally self-sufficient; they outsourced those functions for which they had no competency internally... Outsourcing support services is the next stage. In the 1990s, as organizations began to focus more on cost-saving measures, they started to outsource those functions necessary to run a company...”

Accounting

Outsourcing accounting is a relatively new phenomenon. Most companies in the past would not outsource accounting and housed their own accounting departments. However, this has changed recently owing to the greater prevalence of information technologies and accounting software which allow for easier off-site and online book-keeping, writes a different Forbes article. 

Human Resources

HR outsourcing, in addition to helping cut costs, can be of great benefit to your company’s employees. Outsourcing HR can help foster greater, more impartial company-employee communication while at the same time increase overall efficiency seeing as HR incorporates many other services including employee relations, employee benefits, recruitment and hiring, and payroll.

Payroll

Payroll is another service that is becoming more widespread. According to the Chartered Institute of Payroll Professionals, payroll is among the top three most desired services for companies to outsource. Deloitte writes that outsourcing payroll can be a great means to reduce the often complex, sensitive, and time-consuming task that is payroll processing.

Marketing

On the other hand, marketing is a service that has long been outsourced. Advertising and promotional campaigns have been developed and launched by external agencies for quite a while. However, modern technologies and internet culture requires new analytics-driven marketing campaigns; hence, the outsourcing of marketing to digital marketing experts.

Content Creation

In addition to marketing services as a whole being outsourced, content required for marketing campaigns are also being outsourced. More specifically, content is outsourced to production companies.

Lead Generation

According to the International Centre for Trade and Sustainable Development, “Outsourcing lead generation can simply mean employing a company that drives lead generation to your sales department. These companies might specialize in one aspect of business development – such as cold calling – or they might be in the market for more broad marketing methods.

Customer Service

Customer service is a well known outsourced service. Most if not all call-based customer services are outsourced. A different Forbes article stresses, however, that companies seeking to outsource customer services must pay attention to outsourcing companies’ alignment with core values, language skills, past track records, and employee training. These factors are important considering customer services are likely the first and only company representatives customers interact with.

Information Technology

IT is an expertise that is rightly outsourced very often. IT services require an expert’s touch and are incredibly expensive to develop as IT services can include the following additional services, according to QuoStar: Application/software development; web development/hosting; application support or management; hardware, software and network installation and support; data management; and cybersecurity.

Manufacturing

Of course, some companies, such as the aforementioned Apple, outsource some aspects of manufacturing and/or all aspects of manufacturing. This is usually the case for small companies without their own factories and/or design-oriented companies.

Shipping and Logistics

UPS writes “Focused on making products that their customers rely on and come back to repeatedly, companies need reliable outsourced logistics providers to get their products to market. By leveraging partnerships, companies can effectively accelerate growth, improve operational efficiency, and increase customer satisfaction.”

R&D

R&D is arguably among the most difficult services to outsource, similar to accounting. It runs the risk of developing products that may not be to your company’s exact specification. Moreover, the issue of intellectual property protection arises. However, outsourcing R&D does open the door for a more diverse talent pool to contribute to the development of your company’s products.

Legal Services

According to Deloitte, “...corporate legal departments are increasingly looking to legal process outsourcing (LPO). However, in implementing an LPO solution, corporate legal departments need to determine not only what areas they want to source, but also the right time to implement such a solution — i.e., before, during, or after internally transforming existing processes.”

Conclusion

In conclusion, more and more services are being outsourced by companies. However, doing so comes with its own pros and cons. Outsourcing may help in cutting costs and allows companies to focus on key competencies. Though, it risks entrusting key services to companies that may or may not be on the same page as you. Nonetheless, companies must be prepared to adapt to these new changes to maximize benefits these changes may allow them.