Is Outsourcing Right For Your Business?

The outsourcing of various business tasks is far from new, but at Citrin Cooperman, we noticed a marked increase in its popularity among our clients in 2011. Not only did more companies use outsourcing than in previous years, but they did so for a wider range of activities and functions. 

Two types of companies are most likely to push the boundaries of outsourcing, and ironically, they are on opposite ends of the business spectrum: companies that are expanding rapidly and those that have had a substantial decrease in their revenue. Firms with quick growth find outsourcing a way to keep up with their needs while they look to hire permanent staff or to ascertain that the growth is going to be sustained. Those with declining revenues typically see outsourcing as an economical way to have specialized tasks performed in the wake of layoffs and the harsh reality of less need for permanent staff. 

But just about every company outsources something, and any company that wants to adopt a “lean and mean” strategy will look to outsource as much as they can. Based on what we see at Citrin Cooperman, we expect the outsourcing trend to continue among small and mid-sized businesses in 2012. 

Part of the reason for the increase is the growing number of companies now offering these types of services. With more and more outsourcing choices available, business owners should be evaluating their options on a regular basis. The primary goals are to reduce risk, long-term commitments and capital outlays. The areas to consider for outsourcing include:

• Information technology—the cost of having a staffer keep up with technology is a large one or the potential capital outlay (turn to “the cloud”)
• Human resources—professional employer organizations (PEOs) can become your HR department and handle all administrative and workplace compliance issues
• Warehousing—a fulfillment center saves on staff and real estate costs
• Sales—firms offer sales people who will work strictly for commission
• General staffing—temp firms and staff agencies provide workers of varying skill and experience levels
• Marketing (advertising and public relations)—outside firms can take on these time-consuming tasks

As ways to reduce capital outlays, business owners also need to consider:

• The leasing of furnished office space short term vs. capital outlay to furnish a commitment to a traditional long-term lease
• Leasing vs. buying equipment
• The use of independent contractors vs. employees

In making these decisions, business owners should analyze cost savings, quality, and customer service levels, and how it may free up staff to perform more critical tasks. Outsourcing may save money, but may provide less control over your outsourced firms. They may not be available immediately to work on a project or solve an urgent problem. 

As every business is different, there’s not one answer for all companies. As businesses owners forge ahead into 2012, it’s in their best interest to revisit the outsourcing question throughout the year.