Change is sweeping through the outsourcing sector. Often seen as the preserve of larger companies, outsourcing is being embraced by an increasing number of even the smallest SMEs as their recognition grows of its business benefits. Indeed, with the downturn and its lingering after-effects still weighing down on business performance, 2011 could be the year when outsourcing really comes of age among the UK’s four million SMEs. To reap fully the benefits though, SMEs need to have a keen appreciation of the pitfalls as well as the positives of outsourcing.

Business surveys, polls and research all point at an increasing take-up of outsourcing by SMEs. The IT sector, in particular appears to be benefiting. For example, a poll by online firm PeoplePerHour.com on IT outsourcing, revealed that close to 40% of small business owners plan to increase their use of contract/freelance IT professionals.

This marked change in attitude by SMEs partly reflects changes in the outsourcing sector. Traditionally, companies handed complete control of specific business functions to carefully vetted third parties on contracts that included detailed service level agreements and were of a long-term nature. This typically appealed to large companies as it required greater certainty, planning and commitment – and could also be expensive.

However, with the economic and business activity still depressed and corporate budgets tightening, outsourcing has become a more affordable, less structured, more flexible solution, which has increased its popularity among SMEs.

A small business owner’s time is often best spent on doing the tasks and implementing the actions that he is best suited to do rather than try and become a master of very single aspect of his/her business. And for growth businesses, constantly evolving and changing, outsourcing makes sense, as it allows them maximum flexibility to deliver on their expansion goals.

SMEs are in an excellent position to capitalise on the changes in the outsourcing market at a time when the focus on finance and service levels has never been higher or more intense. Outsourced services for SMEs can certainly deliver a range of business benefits, such as:

- specialised professionals committed to delivering a high-quality service;

- greater levels of efficiency as non-core services are outsourced;

- lowering of direct staff costs;

- transparent pricing structure on particular services for greater budget certainty.

For many SMEs, having the dedicated professionals and support teams that outsourcing firms can provide on particular functions and services is a luxury that they cannot afford internally. The greater level of expertise typically leads to greater efficiency, which also allows direct costs savings from reduced full-time staff and more flexible working arrangements.

Clear, standard pricing, which a outsourcing functions or services can deliver, is also of great benefit to SMEs, which are typically less equipped to manage volatile price moves from suppliers and core goods providers. A good outsourced offering can also minimise such things as errors on contracts, which can often incur penalty charges.

The more sophisticated way in which outsourcing firms offer their services is also more appealing to SMEs. Best-practice outsource companies now have more varied offerings, that allow companies to be at a modest level and then build up the level of service that they require as their business grows and becomes more complex and sophisticated.

As much as the positives are appealing, SMEs need to be aware of potential pitfalls too. For instance, SME CEOs need to be very clear about what they want the outsource company to do otherwise the process could complicate tasks and increase costs rather than the reverse. And even though a service may be outsourced, SME managers should not totally abdicate any role as there is still a need to monitor and ensure standards are being met and work is being done to the agreed level.

Overall, in such a challenging economic and business environment, outsourcing could help many SMEs simply just to survive as well as help underpin their future expansion plans. Like all business processes though, it needs to be carefully thought through, risk and rewards assessed and objectives and outcomes carefully considered. Just opting for the cheapest quote from a beauty parade of outsourcing companies, for instance, is not necessarily the best way forward even if superficially it may seem the easiest and most attractive. Cheap can often be expensive, in business as well as in life.

Source: http://www.outsourcemagazine.co.uk/articles/item/3647-smes-should-not-be-shy-of-embracing-the-business-benefits-of-outsourcing