Common misconceptions of outsourcing – updated!
Many have heard of outsourcing, but many are also uninformed about it. People judged outsourcing based on the myths they’ve heard from other people. Biased opinions generate more myths about how dangerous or unhealthy is outsourcing for a company.
We have recently updated this article for you – enjoy.
Common outsourcing myths:
We debunk these common outsourcing myths – so you don’t have to:
- Outsourcing myth #1: Outsourcing makes you lose control of your business
- Outsourcing myth #2: Outsourcing only an exercise in cutting operational costs
- Outsourcing myth #3: Outsourcing guarantees lack of product or service knowledge
- Outsourcing myth #4: Only accessible to big businesses
- Outsourcing myth #5: Outsourcing will compromise your company’s privacy and security
- Outsourcing myth #6: Outsourcing means offshoring: there is no difference
- Outsourcing myth #7: Outsourcing delivers low-quality services and outputs
- Outsourcing myth #8: Outsourcing weakens the economic status of the country
- Outsourcing myth #9: Outsourcing contributes to the unemployment rate
- Outsourcing myth #10: Outsourcing is unethical
- Outsourcing myth #11: Outsourcing is not a long-term solution
- Outsourcing myth #12: Outsourcing is only for established businesses
- Outsourcing myth #13: IT outsourcing is way too complicated for small businesses
- Outsourcing myth #14: Healthcare BPOs can increase expenses
- Outsourcing myth #15: In-house sales force is cheaper than outsourcing
- Outsourcing myth #16: Outsourcing your sales force destroys company branding
A popular misconception about outsourcing is that it only aims to cut costs, and companies who aim for cost leadership are the only ones who avail outsourcing services. If not explained, this misconception can affect a company’s outsourcing-based decisions. Many companies are also scared of outsourcing because it reveals confidential information to third-party service providers. This myth will be discussed further.
What does outsourcing do? Outsourcing is a service that enables third-party service providers to perform a certain task for a client. Letting third-party providers do the job creates a concern to most companies. Most companies worry about the quality of work that the outsourcing service providers would render.
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Are the outputs aligned to the company’s goals? Does the third-party service provider provide high-quality outputs? Are the company’s data safe in the hands of the outsourcing service providers? These are just several questions that will be answered later on in this article.
Aside from security and quality concerns, the biggest misconception about outsourcing is its limitations and scope. Is outsourcing only limited to big businesses? Will the company lose control in outsourcing? Is outsourcing only limited to established business? These questions can make or break decisions to outsource, and uninformed decision makers might just lose the opportunities they can get from outsourcing.
Outsourcing myths debunked
Business Process Outsourcing (BPO) has been clouded with myths and misconceptions. When people speak poorly of BPO, they gather these biased and uninformed opinions about BPOs. People easily believe in hearsays and naysayers. People who speak negatively about BPOs tend to believe in unreliable sources which present biased and uninformed opinions.
Online sources are often the suspects behind this problem. There are many arguments about outsourcing that are posted online. Moreover, it’s better to consult with experts when it comes to outsourcing-based decision making.
Amid the myths and misconceptions about BPOs, this industry still thrives and continues to grow and develop. In 2016, the global market share of outsourcing industries is at $76.9 billion. However, the outsourcing industry in 2014 reached a global market share of $104.6 billion. Although the trend fluctuated in 2015 and 2016, outsourcing companies’ built strong foundation is continuously standing firm and steady.
But, fret no more. This article will debunk 16 myths and misconceptions that plagued the image of BPO companies. If these myths and misconceptions are left unanswered and unclarified, it could affect future of business decision making.
Outsourcing myth #1: Outsourcing makes you lose control of your business
Companies, big or small, would let third-party service providers perform specific business tasks – that’s how outsourcing works. For example, a company might want to outsource accountants for their payroll or receivables. When companies outsource accountants, these individuals would only work on the specific outsourced tasks – no more and no less. They are not given any significant authority for other matters not concerning the assigned tasks.
The principal focus here is significance. There are two questions that need to be answered.
- Do they have significant control over certain business aspects?
- Do they have significant influence on the upper management?
If they do have significant control and influence, then maybe they are not BPOs at all. Companies hire BPOs to reduce the amount of non-value-added workload to the company. Non-value-added activities are activities that do not bring up or enhance the quality of the company’s products and services.
Furthermore, non-value-added activities are also called as “non-core activities.” Opposite to non-value-added activities are value-added activities. These activities give value to the product or service of the firm. Aside from that, value-added activities achieve the core goals of the firm.
To differentiate value-added from the non-value-added ones, activities that add value to the company’s product or service should possess the following characteristics:
- Activity can cause a significant change in the product or service
- Activity is not a rework activity. Thus, it is done right for the first time
- Customers would pay for this activity
Example of outsourcing misconceptions
To illustrate, assume that ‘Arizona Electronics’ has an outsourcing agreement with New York Manufacturers, Inc. to manufacture and assemble one of its flagship smartphones. New York Manufacturers will buy, process, assemble, and package the product of Arizona. Now, what are the value-added and non-value-added activities in the work provider?
First, processing of direct materials is a value-added activity. Assembly and packaging are also necessary activities to bring the product in saleable condition. These two activities are also value-added. But, some business processes are also necessary to keep the production line moving.
Activities like processing a purchase order, using storage facility, transferring finished goods, preparing a cost of production report, inspecting, quality checking, and preparing client’s billable are examples of business processes that are not value-added, but still necessary for operations.
Non-value-added activities are tasks that increase the cycle time, which is the total time needed to deliver the product or service to the end-user. To increase the manufacturing or service cycle efficiency, companies should make an effort in reducing non-value-added activities, which in return, would increase the value-added ratio. The manufacturing or service cycle efficiency is a measure of the ratio value-added activities in a process.
To know the manufacturing or service cycle efficiency, the business should construct an initial process map and determine which process is value-added or not. Next, determine the total cycle time by adding all the needed hours or days to complete a certain process. Then, add all the time needed to finish all value-added activities. Lastly, divide the total value-added time over total cycle time.
Outsource non-core activities
Keeping non-value-added activities at minimal levels can help in reducing manufacturing or service costs. However, letting outsourcing companies handle specific non-value-added activities can even help more in reducing costs and keeping the production or service lines moving effectively.
Hiring full-time employees to work only for non-value-added activities can be a waste of resources and talents. The main reason why companies hire BPOs is that they want more control over their employees. They want to harness the in-house talent that is stuck in making payroll slips or managing accounts uncollectible.
If companies can hire outsourcing companies to perform non-value-added activities, then they can achieve full control of the business since the employees are fully engaged in activities that achieve the company’s mission, vision, goals, and objectives.
In fact, the Deloitte 2016 Global Outsourcing Survey found out that 78 percent of the respondents felt positive toward their outsourcing providers. This result indicates that majority of companies who outsource are not suffocated with their outsourcing providers.
Outsourcing myth #2: Outsourcing only an exercise in cutting operational costs
In the previous myth, it was discussed that outsourcing could help companies control all their talents for the business’ growth. However, BPOs do not only handle tasks such as payroll, customer service, and what not.
Hiring BPOs can cut costs, but the cost advantage is not the only star of outsourcing. BPOs do business by performing services and providing talents. Companies can hire BPOs for strategic purposes. For example, they can hire BPOs that offer crisis management that would help them in handling corporate issues or scandals.
Outsourcing doesn’t just save costs
Cost reduction is just one of the benefits of outsourcing. In fact, cost reduction mainly aims at fixed costs. For example, Arizona Electronics wants to improve their IT management and desires to use it to their advantage. Arizona hires an IT expert. The company will pay this IT expert around $50,000 at the least or even at $90,000. Aside from the IT expert, a team should be working in the IT management, complete with facilities and tools. That would mean more fixed salaries expenses for the company.
On the other hand, if Arizona would hire an outsourcing company, they’ll only pay a fraction of the cost that they’ll incur from hiring new in-house employees. Arizona would be assured that IT Solutions will provide the best employees to establish Arizona’s IT management. In other words, the client would receive top quality service at a lesser cost.
Moreover, companies can also outsource financial consultants and management consultants. This outsourcing decision is a wise move if the company is expanding. Remember that BPOs profit because of talents. If a specific BPO company can help their client in times of financial or management trouble, then the BPO’s credibility increases.
Thus, the cost advantage is not the primary driver why outsourcing is popular. BPOs can offer more advantages other than cost reduction. The Deloitte’s 2016 survey found out that companies are outsourcing mainly because of cutting costs (59 percent), focusing on business goals (57 percent), and solving capacity issues (47 percent).
Outsourcing myth #3: Outsourcing guarantees lack of product or service knowledge
People who have experienced call center service would often complain about the quality of the service they received, particularly the call center agent’s ability to address the concerns of the callers. Customer service agents would usually follow a certain protocol in handling the customer’s concern. This style becomes a problem when the concern of the client is not solved. The call center agent’s reliance on formats only show that they lack the knowledge on the services they represent, and this issue creates a negative image for outsourcing in general.
Whether it’s a call center service provider or an IT service provider, most businesses are questioning the ability of the outsourcing companies to perform services on their behalf. Starting a BPO company is not easy. Some may think that one can start an outsourcing firm by gathering individuals who could do a specific task.
However, outsourcing is way more profound than that. Outsourcing is not just a performance of services. It is about performance backed with experience and expertise. Outsourcing companies do business by acquiring deep understanding of their services and offering it to companies who need it.
The core of outsourcing is the dedication to its services and customers. The objective of outsourcing for this matter is doing the job right at the best quality. Through this objective, BPOs commit to continuous development and learning. If their knowledge is outdated, they would be entering a battlefield with sticks and stones against tanks and rifles.
In the Deloitte’s 2016 survey, over 50 percent of the respondents found out that “third-party advisors added value during strategic assessment, business case development, RFP / vendor selection, and negotiation and contracting.”
Outsourcing myth #4: Only accessible to big businesses
Although outsourcing companies are more attracted to bigger clients, they are not closing their doors to small businesses. Small and medium-sized entities (SMEs) are the top customers of BPOs.
Because of the cost savings that SMEs can get from BPO services, the outsourcing industry chooses no size. SMEs are growing companies. BPOs tend to choose SMEs with potential. Why? It’s because they want to become the long-term service providers for these growing companies.
In fact, 27 percent of companies who outsource have one to less than five billion of annual revenues, according to the Deloitte’s 2016 survey. The results of the survey also showed that 23 percent of companies who outsource have 25 million of annual revenues. This fraction indicates that big entities and SMEs both play in the outsourcing industry.
Outsourcing myth #5: Outsourcing will compromise your company’s privacy and security
Outsourcing articles mention privacy breach when discussing outsourcing. At a first glance, many would assume that BPOs can see through the company’s true image. It may sound scary, but this is the fear why most companies think outsourcing is a privacy breach.
In business relationships, trust is the key to a successful and long-lasting relationship. BPOs operate by earning the trust of their clients, which can then be earned through honesty and integrity.
BPO wants the trust of their clients to be strong and firm. Companies are at risk when exposing financial information to BPOs, and this is a reality that cannot be avoided. Companies need to find the right outsourcing work provider to reduce the risk and worry of giving confidential information.
Moreover, it is the BPOs’ responsibility to use this information for the client’s best interest. The security and safety of a company’s data is the top priority of BPOs. If they mismanage the data of their clients, companies will lose confidence in the BPO industry, and they will be eradicated in the business arena.
Of course, BPOs aim for a going concern. The competition among BPOs now is privacy protection. Companies shouldn’t worry about this as long they choose the right outsourcing company for them.
According to the Deloitte’s 2016 survey, only 23 percent of the respondents said that cybersecurity risks affect their outsourcing decisions. This result shows that more companies trust their outsourcing providers to keep their information safe.
Outsourcing myth #6: Outsourcing means offshoring: there is no difference
Outsourcing and offshoring are two different teams. They’re not even related at all. As defined, outsourcing is an agreement between a client and a third-party service provider wherein the latter will provide services to the client. Business offshoring is just getting a job done in a different country, but the employees are still part of the firm.
Offshoring becomes cost advantage since some countries have lower wage rates and tax rates compared to the company’s home country. Access to lower wage and tax rates is one of the advantages of offshoring.
Outsourcing vs. offshoring
Don’t be fooled. Companies could still hire BPOs from other countries. For example, businesses in the United States can hire BPOs in the Philippines and India for customer service jobs. Now you might say, “That sounds like offshoring for me.”
The focus in determining whether it is outsourcing or offshoring is to identify the status of the party providing the service. Here’s a guide to help you understand.
- STEP 1: Does the company elect other entities to perform a specific business task?
- IF YES, STEP 2: Is the entity located in another country?
- IF YES/NO, STEP 3: Is the entity a subsidiary or a partner company?
- IF YES, Then, it is offshoring.
- IF NO, Then, it is outsourcing.
Although outsourcing and offshoring are two different things, there is a thing called “offshore outsourcing.” It is a hybrid of outsourcing and offshoring, and it relatively combines the benefits of the two.
Offshore outsourcing is hiring a third-party service provider from another country to perform services for the company. Thus, it is guaranteed that service is done in a foreign country and the service provider is a third-party.
To sum it up, offshoring and outsourcing are not the same. The two share characteristics only when combined through offshore outsourcing. The defining point in between offshoring and outsourcing is the status of the service provider.
Outsourcing myth #7: Outsourcing delivers low-quality services and outputs
The main focus and objective of outsourcing is ensuring quality and integrity of their outputs to clients. To illustrate, take for example, an accounting firm. One of the service areas of an accounting firm is financial statement (FS) preparation.
Publicly-listed companies need outsourced financial accountants to prepare their financial statements. Publicly-listed companies are companies that are listed on the stock exchange. With that kind of status, these companies have public liability to stockholders.
Since some stockholders don’t get involved in the internal operations of the company, FS is the only way that they could assess if the company is doing good. Aside from that, future investors also use FS for financial analysis.
Since a lot is at stake, accounting firms need to send the cream of the crop. These financial accountants are experts in the FS preparation. They are updated with financial standards, particularly IFRS for most countries and GAAP for the United States.
With this knowledge and talent outsourced, companies are assured that their FS is prepared carefully and correctly. Should the accounting firms deliver low-quality services, their credibility would go down.
In fact, the Deloitte’s 2016 survey compared data from 2014 and 2016. Survey results found out that concern on poor service quality plummeted to 20 percent. The 2014 data showed that 48 percent of the respondents report poor service quality. This significant decrease shows that outsourcing industries are now improving and innovating.
However, a hasty generalization that outsourcing delivers low-quality services and outputs is fallacious on all counts. The best way to reduce the risk of getting low-quality output is to choose the best outsourcing service provider among the rest.
Outsourcing myth #8: Outsourcing weakens the economic status of the country
Uninformed individuals tell that outsourcing is nothing but a killer to the economy. That viewpoint is fragmented and biased. In an economist’s point of view, outsourcing strengthens the economic status of a country.
Recall that outsourcing is a cost advantage for companies. Aside from that, companies can refocus in-house talents to work on the important goals that would lead to the company’s growth and development. Combining cost advantage and refocusing company talents, this combination increases productivity and efficiency.
Productive and efficient companies provide better goods and services to the market. As a result, the effect of better goods and services is a healthy market, wherein goods and services are offered at better prices without sacrificing profit goals.
More from Outsource Accelerator: Read our white paper exploring why and how outsourcing is a win-win for all involved.
A healthy market gives birth to more investments and employment. If companies are improving, the country can assure the long-term existence of companies. Thanks to outsourcing, the longevity of businesses secures more tax revenues and employment opportunities for skilled individuals.
Outsourcing myth #9: Outsourcing contributes to the unemployment rate
The driving force behind this myth is that jobs are lost when a company outsources jobs especially if it was an offshore outsourcing.
Unemployment in the United States dropped. Jobless claims are now 10 percent lower than the 25-year average. Statista presented that annual unemployment in the United States is at 4.4 percent. The household survey in the United States also found out that there are 2.2 million Americans who are employed compared during the recession.
More from Outsource Accelerator: Read our white paper exploring why and how outsourcing is a win-win for all involved.
If outsourcing creates unemployment domestically, how come unemployment rates are lower? In fact, outsourcing helps a company expands. When companies expand, more jobs are created. Cutting costs through outsourcing makes a company expansion possible.
However, outsourcing does not immediately equate to offshore outsourcing. There is this branch called “onshore outsourcing.” For example, U.S. companies can use onshore outsourcing by hiring BPOs in the United States.
Outsourcing myth #10: Outsourcing is unethical
In many Western countries, offshoring has become a dirty word that is nearly synonymous with job loss – but also there is concern for the welfare of the outsourced workers. People are concerned for the conditions that the outsourced workforce is working under – and they are concerned for the relatively low pay that they receive. This is a common misconception of outsourcing, and it could not be further from the reality.
The outsourcing workforce in Philippines is paid very well, compared to other members of their community, and economy as a whole. They can often be paid 100%-200% more than people in similar, but non-outsourcing roles. Also, The Philippine government is generally very protective of their labor-force, and very pro-labor when it comes to regulation and policy.
The outsourcing industry offers people a great environment to work in, fantastic facilities and training, and an exciting career ladder. The money that they earn is a good salary, relative to their costs of living.
Outsourcing is a win-win
This is such a hot topic, that we have written numbers papers on the topic:
- Outsourcing is a Win Win Solution – a white paper
- How a USD $300 Monthly Salary Supports Decent Living Standards in the Philippines
- Comprehensive Guide to Payroll Salary Compensation, Benefits, and Allowances in the Philippines
Outsourcing myth #11: Outsourcing is not a long-term solution
People think outsourcing is for short-term only because they look on the outsourced tasks that are non-value-added. As a recall, outsourcing companies also offer strategic services such as financial consultancy, supply chain services, and enterprise resources planning, to mention a few.
BPOs want long-term clients. Long-term clients secure a long-term source of revenue and cash flow. For the clients’ perspective, companies should go for long-term contracts with BPOs. Through long-term agreements, BPOs can fully understand the structure of the company.
By learning the client’s business goals, strategies, and vision, BPOs can come up with solutions that are aligned with the client’s ideas. However, BPOs are trained to offer business solutions that are aligned to the client’s wants. Through a long-term agreement, these business solutions will be more accurate and more reflective of the client’s ideas.
Entering into a long-term partnership with BPOs can enhance the quality of outsourced services where both parties would gain.
Outsourcing myth #12: Outsourcing is only for established businesses
A common myth in outsourcing is that only the “big guys” can use it. That might sound true at first, but that’s absurd. The target market of outsourcing does not depend on the business’ existence. Whether the business is starting or not, outsourcing is not biased in this matter.
In fact, small businesses are in need of outsourcing companies. BPOs can provide consultancy, advisory, and other services to keep the business growing. The main challenge for small businesses is longevity. Most business failures are due to mismanagement, complacency, fraud, and decreasing customer loyalty.
BPOs can offer solutions for that. These solutions are not just for a short-term plan, but also for a long-term. For mismanagement, outsourcing companies can send management experts to evaluate the business plan and offer solutions to keep it viable. Common mismanagement problems are due to agency problems.
Agency problems arise when there is a conflict of interest in the management, particularly in the key personalities running the firm. When agency problems arise, there will be agency costs. These agency costs damage the business as a whole.
In an agency problem, there is a conflict between increase shareholders’ wealth and managers’ wealth. When such problems start to develop, the interest of the business as a whole – which refers to the cooperative effort between shareholders and management – is not followed.
Outsourcing can help by re-aligning the interests of the individuals to the best interest of the company as a whole. Financial and management advisors can help in assessing the problems of the company. This scenario shows why outsourcing is helpful. If you examine, hiring third-party advisors and consultants promotes integrity and neutrality. In this manner, the third-party advisor can fully assess the status of the organization and propose solutions that would be for the best interest of everyone.
Outsourcing a powerful tool for small business
Outsourcing can help startup business identify their market properly. Backed by experience from other clients, BPOs can help startup businesses create a viable and feasible marketing plan that matches their capability as a startup. Since BPOs are designed for services such as marketing, a startup business need not to worry about everything. BPOs do their job, while the owner keeps the business running smoothly.
Outsourcing can be the key for most companies to be established. Startup businesses are still learning and experiencing almost everything. For example, startup businesses are still learning how to control costs, especially how they could achieve their breakeven point in the first months of operations. The learning and application of management principles take time.
Outsourcing companies can help these businesses make better decisions, improve processes, and secure a future for their products or services. A startup business’ goal is to continue operating business in going concern. Third-party experts guide the startup management based on the client experience and the business expertise. With advisors and consultants, the startup business can learn from them and can soon stand on its own.
Lastly, most startup businesses need to keep their finances and internal control strong. Hiring accountants from accounting firms can help in designing an accounting system that is fraud-resistant. As a startup business, employees who steal money from the company are not good. Having strong and firm internal control procedures can help startup businesses protect its financial resources from theft or fraud.
Outsourcing myth #13: IT outsourcing is way too complicated for small businesses
The Deloitte’s 2016 survey showed that 72 percent of the respondents answered that they currently outsource IT. This information shows that IT is evolving and there is a need coming from it.
In the age of the internet and communication, businesses can access data from any part of the globe. Businesses can transfer tons of data from point A to B in less than an hour. With this kind of technology, many businesses can see its potential in improving business processes.
Small businesses, unfortunately, are often disregarded when talking about IT application. Though big or small, every business has its own data needs. Small business are still growing and in need of careful monitoring. IT applications can help in simplifying complicated business processes.
Small businesses can start with using bookkeeping software or spreadsheet programs. Also, they can have their own program specifically designed for the needs of the business. This is the reason why IT outsourcing is also important for small businesses. Small, medium, or large businesses need IT outsourcing. Size is not the question here.
IT outsourcing companies do business by knowing the company’s needs and building an IT infrastructure for those needs. With an IT system built for the business, work efficiency and effectiveness are expected to increase. Accuracy and security of information are also assured.
Common outsourcing myth: IT can’t easily be outsourced
Frequently outsourced IT services include software development, web hosting, technical support desks, database management, telecommunications, and infrastructure. These services are vital for companies whether they are big or small.
For example, small businesses can reduce fixed salaries expenses if they hire IT outsourcing companies for a technical support team. Tech support on-the-line or on-call means that companies only pay for the services they availed. Compared to having an IT specialist on the roster, businesses may find themselves paying $90,000 and not getting the results they want.
Aside from that, businesses can save from employee benefits given to in-house IT specialists. They don’t have to worry about the unavailability of the employee in times of need. Tech supports are usually available 24/7, and the business can ensure full-time help from outsourcing.
Outsourced IT specialists can also create a transaction processing system (TPS) to reduce manual intervention in transactions. An in-house IT team working for a TPS is expensive. It is better to have them outsourced from outsourcing companies that have been known to have helped other businesses improve their processes.
Small businesses need all the cost-saving techniques on their deck. IT solutions are one-way to mitigate costs. Consulting IT firms and choosing the best IT firm can help small business build its road to growth.
Outsourcing myth #14: Healthcare BPOs can increase expenses
The healthcare sector is one of the most important sectors of society, dealing with medical and health services. Hospitals and medical facilities deal with a lot of patients in a daily basis. The main function of a hospital or a medical facility is to provide healthcare and hospitalization services.
However, there are lots of other hospital functions in reality. One of these critical functions is revenue cycle management (RCM). Hospitals must immediately provide healthcare services to individuals who are in need of medical help. This system creates a problem for hospitals. How can they keep track of these patients?
RCM focuses on the financial aspect – in short, keeping track of medical billings of patients. While doctors and nurses do their jobs in keeping the patients healthy, the RCM ensures that all services or products used are accounted and billed to the patient.
An RCM system utilizes a medical billing software to keep track of billings and usage of facilities availed for the patient. It is no joke that hospitals grow at a faster rate compared to other service businesses. As hospitals grow, the management might lose control of the management functions and may cause a decline in cash flows. But, having a competent RCM should make things better.
Below are the reasons why outsourcing RCM is a good step for a healthcare provider:
1. Constant changes in regulations
RCMs communicate with insurance companies to access the healthcare benefits of the patient. Since changes in insurance policies equate to changes in transaction treatments, in-house management of RCM would feel the full impact. Employees will have more workloads on their desks. Hospitals would be responsible for the in-house training of staff to update them on recent developments.
However, if RCMs are outsourced, outsourcing companies can keep up with these changes. There is no need for an internal training and hospitals are rest assured that their revenue is handled properly.
In fact, recent accounting standard for revenue recognition has been made effective starting January 1, 2018. This new revenue standard is IFRS 15 Revenue Recognition. This new standard changes the way how revenue is recognized. In-house staff would undergo training and seminars to learn about this standard. This would mean more costs for training, but outsourcing companies can make sure that their employees are updated ahead of time.
2. Reduction of clerical errors in revenue recognition
Errors may be material or not, but every cent is important. Having an in-house RCM team can make employees stressed, thus causing them to commit more errors. Since in-house RCM is costly, most hospitals would hire only a few to handle the tasks. But soon, workloads will pile up.
Having an RCM outsourced can help in reducing errors in revenue recognition. Also, outsourced RCM can assure that revenue is accurate.
3. Cost-cutting is inevitable
Whether the hospital cuts operational costs or layoff employees, poor revenue measurement and collection affects the profit margin of the company. Having an efficient RCM can help in measuring and tracking revenues as it is earned. With improved revenue collection, income figures will reflect the true performance of the business. Perhaps, a low-income figure is a result of poor revenue measurement. Having professional RCM managers outsourced can help in reducing costs and improving the accuracy of revenues.
Outsourcing myth #15: In-house sales force is cheaper than outsourcing
An in-house sales force is way deeper than the false assumption that it is cheaper than outsourcing a sales force. The truth is that an in-house sales force is not cheap at all. If a sales force is established internally, this means that the company would hire full-time employees to work on the marketing plan.
It sounds good, but the costs attached to that do not figure. First of all, the company would pay an average of $70,000 per year. That’s just the basic salary. There will be employee benefits involved. Vacations, holidays, and sick pays also add to the cost of an internal sales force. Roughly, that would reach $90,000 per year, and that’s just a large amount of money.
Entry-level marketing graduates are inexpensive to hire, but inexperienced as well. On the contrary, professional marketers are experienced but expensive. The buy-or-build decision in this depends on the business’ ability to finance.
However, the benefits that companies would receive from insourced sales force versus an outsourced sales force are relatively the same, considering that the people in the sales force are competent and experts. But, the price difference is the ultimate deciding factor.
Outsourcing labor, such as sales force, grants the company access to a wide range of marketing solutions. Outsourcing companies offering marketing assistance are backed by experience and knowledge in preparing marketing plans and implementing them. Aside from that, an outsourced sales force can work faster since the company has a competitive knowledge base that could help the sales force make better solutions, while an in-house sales force may have a difficult time to gather information.
Outsourcing myth #16: Outsourcing your sales force destroys company branding
People say, “Only you can sell your product better.” However, that’s not the case at all times. Even though the product or service is irrefutably marketable, having a sales force build the product’s brand can sustain the product in the market.
A marketing mix is vital for product or service branding. The four Ps of a marketing mix are Product, Place, Price, and Promotion. An outsourced sales force can have help in developing a better product in the market. The leverage that outsourcing companies have is their knowledge base.
Outsourcing can help in establishing a well-crafted marketing plan. This plan starts with the selling proposition. Outsourcing companies must have data from customer surveys in the past. This knowledge acquired from previous clients can help in forming better marketing solutions. Understanding competition and customers rely heavily on data. An in-house marketing team would be spending more time in conducting surveys, interviews, and research.
However, service providers are made available of acquired knowledge and experience in outsourcing companies. Outsourced personnel can consult experts in their company. This knowledge cannot be easily achieved internally. It would take years before an organization can establish a knowledge base in marketing and sales.
Outsourcing your sales team can be a game changer
The sales force is tasked to solve marketing problems. Competitors will always be the number one hindrance to similar products and services. With the experience outsourcing companies have, short-term and long-term solutions can be implemented to ensure that the product or service remains competitive.
Branding is a shared effort between the client and the service provider. An outsourced sales force is present to translate the message the client wants to tell the customer through its products and services.
The bottom line is choosing the best outsourcing business. The best option for companies is to choose the outsourcing company that has been a leader in marketing and promotion. However, an in-house sales force is not discouraged. Startup companies are encouraged to avail sales and marketing outsourcing services so that they can be guided properly.
Established companies with established brands can also hire sales and marketing outsourcing companies. Outsourcing can be useful for every company, not just for the established ones.
Outsourcing myths dispelled
Outsourcing has become a major player in the growth and development of most companies worldwide, but myths and misconceptions plagued the image of outsourcing. Outsourcing has its strengths and weaknesses. However, companies who want to outsource should use outsourcing services to their advantage.
More from Outsource Accelerator: Read more about outsourcing success stories here
One thing that companies should remember is that outsourcing is a choice. It is not inevitable. Companies should make a cost-benefit analysis before engaging in outsourcing or hiring a third-party advisory. However, in these changing times, one challenge remains. Outsourcing companies should innovate to offer better services for their clients.