Insourcing. Outsourcing. Offshoring. Co-Sourcing. You’ve probably heard of these terms. You may even know of companies that are using one or more of them to grow their business.
But what do these terms actually mean? And can you take advantage of them to grow your business?
Insourcing usually means performing a business function internally. For accountants, financial planners and SMSF administrators this could mean either:
– performing the work in-house
– bringing a third party outsourcer into the business to do the work.
Many companies prefer insourcing because it lets them maintain control of the entire operation. But insourcing does have its disadvantages. As part of its normal lifecycle, the business will be adding new services, products and processes to its overall operation. This can stretch current resources, create new processes that need a different skillset, and even have staff members leaving the company.
And when that happens, businesses often choose our second option — outsourcing.
Outsourcing involves transferring a portion of work or even an entire operation to outside providers or suppliers rather than completing it internally. Outsourcing has increased significantly in recent years as companies look for ways to improve efficiency and reduce costs. And with Australia’s high labour costs, and small- to medium-sized businesses often struggling to gain efficiencies in every stage of the value chain, it’s hardly surprising.
Offshoring (not to be confused with outsourcing) is when a company relocates a business process to another country. With many Asian countries having considerably lower labour costs, a lot of Australian companies look at offshoring work to further reduce their labour costs.
Compared to outsourcing locally, offshoring usually lowers their overall operating budget. But the loss of control, quality and associated business risks can increase significantly. That’s why some companies set up business hubs in these countries instead, employing their own staff who are then supervised by existing staff to reduce risk and protect the privacy of sensitive client information.
The most recent concept is co-sourcing, which combines some of the benefits of both insourcing and outsourcing. It’s essentially a business arrangement where the work is done by both internal staff and external workers. This can help businesses lower the costs of their back office or administrative functions while still controlling the critical parts of the client relationship.
Co-sourcing is based on developing a long-term relationship with a business partner. It emphasises traditional values of trust, excellent service and quality you’d normally associate with a partnership rather than a contracting arrangement. The business has more control over the operational process, and assumes a shared responsibility for delivering the final product or service to the end customer.
Here at Superfund Wholesale we’ve been providing dedicated administration services to advisors for more than five years. And we’ve seen co-sourcing work exceptionally well for businesses who use the right service model and take advantage of the latest cloud based technology.
If you’d like to know more about insourcing, outsourcing, offshoring or co-sourcing, and whether they could help you grow your business, get in touch with us today.