How to Effectively Perform a Cost-Benefit Analysis When Considering Outsourcing

57% of executives today opt for traditional outsourcing to reduce staff costs. How much you can save varies depending on several factors. To learn more about these factors, we spoke to the team at Supportyourapp.com, a global Support-as-a-Service company. 

In this article, we will go through the primary factors to consider when performing a cost-benefit analysis for outsourcing. Understanding these properly will make it easier to determine if it is the right time for your company to consider handing over tasks to a third party. 

Current Overheads

Your first step is determining how much your in-house team costs. Consider the following: 

• Salaries and Perks: Consider the overall cost-to-company for each consultant’s package. Include wages, medical benefits, paid time off, retirement benefits, and incentives. 
• Office Space: How much does it cost to house your team in terms of space rental, furniture cost, and utilities? It’s also worth considering the cost of maintaining a break room if you have one. 
• Equipment: What is the cost of buying and maintaining the needed equipment? What software do you require? How often do you need to upgrade it? 
• Recruitment Costs: What does it cost to source and recruit employees? How do you find the best candidates for the role? What do the consultants in your area expect in terms of attractive working conditions and salary packages? 
• Onboarding and Training: Establish the costs of training consultants both now and also to keep their skills up to date. 
• Miscellaneous Expenses: These include the cost of office supplies, tea, and coffee, travel expenses, and other ad hoc costs to run the team. 

Performing this calculation on a regular basis ensures that you get an accurate idea of what your team costs. In addition, knowing this gives you an excellent benchmark against which to gauge outsourcing expenses. 

Costs in the Country You Outsource To

One of the primary benefits of outsourcing is that it gives you access to the global talent pool. You can save significantly on expenses by outsourcing to a country with lower staffing costs. 

Examples include outsourcing to Europe, India, Singapore, and the Philippines. Accessing teams based in Europe may be particularly advantageous if you require a multilingual consultant team. 

What Work Are You Outsourcing? 

Are you outsourcing a simple function like data capture or something more complex such as technical support? Naturally, the level of expertise you need will impact the price you pay. Also, the type of interaction will play a role. 

The higher the level of expertise and the more complex the interaction, the more you can expect to pay. 

For example, if you hire a team to manage customer support, you could start with a simple phone-answering service. However, adding other elements, such as answering emails and social media comments, would add to the cost. 

Do You Require Dedicated Support? 

If you outsource customer support, you may choose between a: 

• Dedicated Team: A dedicated team works only for your company. The cost is higher, but the experience more closely mirrors that of a real-life working environment. 
• Shared Team:  A shared team is one that represents more than one company. The cost is lower, but the couple shares their workday handling queries for separate clients. 

Potential for Reputational Risk

This is an intangible cost but one worth considering. You may mitigate this risk by carefully vetting any vendor with whom you deal. 

Conclusion

Outsourcing offers companies a viable way to reduce operating costs. However, firms must understand the base costs of running an in-house team to properly determine the cost-benefit of hiring a third-party provider. They must also carefully vet providers to ensure that they mitigate the risks properly.