Outsourcing has been a regular fixture in the development strategy toolbox of every business. The process has evolved from a cost-cutting, stop gap measure in the 1970’s into an impactful course of action that could help a business thrive despite periods of economic turbulence.
Cost reduction remains the primary reason why businesses outsource services. Outsourcing streamlines business costs by capitalizing on cost differentials or comparative advantages particularly labor. This is the reason why low wage countries such as the Philippines, India and China have become popular destinations for outsourcing services.
Outsourcing has also benefited the host economy. The Philippines’ outsourcing industry has registered an average of 17% annual growth since 2004. In 2015, the industry generated US$15.5 Billion in export receipts for the Philippines and is expected to earn US$28.9 Billion in 2017. Long term forecast indicate that the Philippines’ outsourcing industry is on track to hit US$48 Billion in 2020.
The bulk of the earnings in the Philippines’ outsourcing industry is generated by the large companies such as Accenture, Convergys, 24/7 Customer Philippines, JP Morgan and Telephilippines. Some of these companies such as Accenture, Convergys and PeopleSupport are based in the US. They have the scale and resources to manage different campaigns across a wide variety of industries.
These large outsourcing companies generally pay the highest salaries, the most generous compensation packages and attractive career/ succession plans to entice the best talent in the market. Most businesses that want to outsource services for the first time would prefer to have these large companies manage their campaigns.
But does large scale guarantee success?
Accenture, Convergys and the rest of these companies became large for a reason: they generated long term growth and sustainable results for their clients. More than success, the more immediate concern is would they accept your business? And if they did, how much time, effort and resources would they allocate to run your campaign?
There are a few things you need to understand on how big business operates:
- Many have decentralized systems of operation. As a company gets bigger, the main drivers become less involved and more distanced from clients. They leave the day-to-day operations to paid managers and supervisors.
- Big Business manages its portfolio based on PROTI or Potential Return on Time Invested. Put simply, if managing your campaign will not result in returns pursuant to the company’s profit objectives they may either:
- Sub-contract your account
- Drop your account
- Not accept your account
There should be no surprise as to how these large outsourcing services providers operate. Banks have Private Banking departments where depositors who have the largest placements are given special treatment. They get higher rates, given access to high yield investments and are assured of receiving convenient service.
If you are planning to outsource services, you may want to consider smaller- sized proprietors which are sometimes referred to as boutique outsourcing service providers.
The word “boutique” is associated with selling fashion apparel. But it also refers to servicing select clientele. A boutique outsourcer can be described as having the following characteristics:
- Small scale; minimum of 5 to a maximum of 50 employees.
- Provide both on-site and off-site operations.
- Caters primarily to small businesses.
So why should you consider contracting the services of a Boutique Outsourcer?
More Flexible Business Modeling – Unlike the large companies, boutique service providers are more amenable to customizing services because they want to grow their business as well as yours.
For example, if you need personnel development and training for your company but you want it scheduled according to scale, a boutique services provider may suggest the following schedule:
Month 1 – Recruitment, Selection, Hiring and Training of Entry Level
Month 2 to 3 – Evaluation, Testing and Orientation
Month 4 to 6 – Identification of Core Personnel
Every 15th and 30th – Coaching, Consultation for Managers
Every Quarter – Business Review
The boutique services provider can design a schedule that will be aligned with your business goals. These are all workable, negotiable and flexible in content and execution.
Lower Priced Services – Large companies may package their services the following ways:
- Cost per head per skill + Management Fees
- Cost per hour per seat + Management Fees
- Commissions + Management Fees
- Commissions + Hourly Rate
There could be other ways a large company could charge clients. What you should understand is that they will always be more expensive. Large companies make sure their operating costs are covered and that their margins are protected.
A boutique services provider offers simpler terms of payment:
- Fixed hourly per head
- Fixed payment per project
Their fees are factored into fixed hourly or project fees. As further proof of their business flexibility, boutique service providers can design a system whereby your campaign can be managed by a combination of onsite and offsite (home based) agents to lower your costs.
Greater Involvement of Business Owners – If you spent US$1 Million on your car, what do you think would happen if your driver smashed it against a concrete wall?
You’d probably fire your driver but he won’t be held accountable for damages. If you don’t have insurance, you’d have to pay the cost of the repair. Even with insurance, your premiums would go up.
With large companies there would be lesser involvement from the people who grew the business. Your account would be managed by paid middle managers who have nothing to risk with your business except a poor year-end evaluation. They can always find another job.
With boutique service providers, they still think and operate like small business because they are small business. Although there would be less micro-managing, the business owners remain involved in the day-to-day operations of their clients’ campaigns.
If you want to know the status of your campaign, rest assured, the owner will talk to you directly not the paid supervisor or account manager.
The last reason stated on why you should work with boutique outsourcing service providers is very powerful. They believe in PROTI but they will not use it as basis for giving up or sub-contracting your campaign.
Instead they will use it as a baseline for improving the return on time invested on your business.
Will this guarantee success? No. But you can be certain that they will have your best interest at heart. Why? Because of shared interests; the owner of the boutique center wants to grow your business so he can grow his.
With boutique outsourcers, you don’t just have a third party service provider. You have a strategic partner.