To outsource or not to outsource, that is the question. Whether ‘tis more beneficial to retain and maintain an activity in-house or farm it out to some external firm. Ah, there’s the rub. Should I keep control over the processes involved, or only look at the outcome? Is this a core activity of my company, critical to it's success; or is it a supplemental contributor?
This has been a key concern for many companies in many different fields of endeavor. From banking to manufacturing to healthcare, insurance, hospitality, retail, government, transportation and more, there is always the question of how can I do what I do better and with less cost?
What is Outsourcing?
So what do we mean by outsourcing? It is basically the contracting of some external entity by a particular firm to provide a specific set of services to, for, or on behalf of that contracting firm. It generally involves purchasing a particular set of skills that the purchasing firm does not have, cannot afford to develop, or chooses not provide, in-house. Some companies are notable for having outsourced their customer service services to foreign countries. In the healthcare field it is not uncommon for hospitals to outsource their food service and housekeeping activities to companies that specialize in those areas.
Why Should I Outsource?
The only real reason to outsource an activity is to achieve some sort of economic advantage over doing it in-house. Here are some specifics to consider:
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Labor cost: According to the U. S. Bureau of Labor Statistics, wages typically account for about 70% of an employee’s salary package. The other 30% is made up of taxes and benefits. In addition, of the eight hours a day a person normally works, they calculate that only six hours are productive. So, for a person earning $35,000 per year, the cost is actually $50,000 to the company for which they are only getting 9 months worth of work. A full year’s worth of work would cost an additional $16,667 for a total of $66,667, almost double the $35,000 wage.
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Skill level availability: A company that concentrates on a particular area of activity will likely have the availability of particular skill sets in greater quantity, and at a higher level than companies that are engaged in something else. For example, an auto maker will not generally employ a person to do their advertising. Instead they hire, or contract with, an advertising agency.
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Space availability: Another reason to outsource is to save space. Depending on the service or activity, an outsourced activity may be accomplished off-site as well, freeing space for other endeavors.
What Should I Not Outsource?
The answer to that question will, of course, depend on what you do. A hospital outsourcing its food service is one thing, but for a restaurant to do that would be very weird, to say the least. Some more things to consider:
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What are your core competencies? What are those things that define your business, that are critical to your success? Those are the things you do not outsource. Those you keep in-house.
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What are the low-skill and low-cost activities? Those you keep in-house also unless those positions require management levels that raise the costs involved.
So what is left to outsource?
Do the math.
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Special, especially newer, skill-sets that while not critical core activities, may still be very supportive to the success of your company.
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Activities that would cost more to hire an employee than to contract out at the skill level required.
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Activities that can be done off-site
Niche Marketing Methodologies Like Inbound Marketing
The salary for a competent, trained, certified inbound marketer will likely run around $60,000 - $70,000 per year (or more). Add to that taxes and benefits, and you are looking at a cost of $85,000 to $100,000 per year. Factoring in the 20% to 25% non-productive time brings the cost to between $100,000 and $125,000 per year, or around $8,000 to $10,000+ per month. That is just for inbound marketing and doesn't include all the other marketing activities, that your organization should consider.
KBK Communications just happens to be in that niche market which makes it a very viable candidate when considering an activity that can (and should) be outsourced. We bring a high skill level in an area of activity that is extremely supportive to the success of your business. What's more, it can be accomplished off-site at a cost which is less than that of a hired employee.
