As the Covid-19 pandemic continues, the economic strain falls hardest upon the Small-to-Medium Business (SMB) category – businesses with annual revenues less than $500m. Economic uncertainty adds additional strain to the everyday struggle and is forcing many SMB entities to consider outsourcing.
Outsourcing provides many benefits, but it’s not without risk. Today’s blog will cover some of the financial realities driving these changes, benefits of outsourcing and a few tips to consider when making an outsource selection.
Small and Medium Business Instability
In the United States, we have over 13.8 million businesses with under 10 employees and more than 1.25 million businesses with 10 to 50 employees. These SMBs provide critical sources of income and jobs to the economy.
Unfortunately, the pandemic is hitting SMBs hard across the globe. In the UK, 80% of SMBs expect a decline in business for 2020, and 36% forecast a drop of more than 90%. The average expected decline in business is predicted to reach 57%.
In the US, the forecast is not as quantified. But, just over half of all US SMBs have already laid off employees – a number which climbs to 78% for those SMBs with under $20m in revenue.
As if the economic forecast wasn’t bad enough, for those SMBs trying to recruit tech talent, the deck is stacked against their success. Over 67% of SMBs cannot hire adequate employees with technical skills!
A huge contributor to this issue is that 75% of tech talent would prefer to work for large, stable companies that pay more, offer more training, and offer better work-life balance.
The Need to Outsource
Unless a function is critical to your core business, consider outsourcing.
Outsourcing can allow an SMB to concentrate on their core business focus without having to build expertise in areas that do not drive the business.
Unfortunately, declining 2020 revenues will force many SMBs to consider changes simply to survive. Thirty-seven percent (37%) of all small businesses with under 500 employees outsourced at least one business process prior to 2020, and over 52% are planning to outsource in the near future.
The most common services outsourced are accounting (37%), IT services (37%), and digital marketing (34%). Surveyed SMBs choose to outsource to increase efficiency (24%), increase expertise (18%), increase flexibility (16%), free up employees’ time (15%), increase available resources (12%) and reduce operating costs (12%).
In other words, they upgrade skills, free up capital, free up time, and allow themselves to adapt more efficiently to changes in their business.
For IT services, the difficulty in hiring technical talent increases the need to outsource, but that’s not the only reason. Most companies have baseline needs for everyday business operation, and additional surge requirements for IT for special occurrences, such as a sudden increase in sales, a cyberattack, or an infrastructure upgrade.
Staffing for surges is both expensive and wasteful.
Can your SMB really compete with the Fortune 500 chain down the street for outstanding IT talent? Sometimes an organization will get lucky, but often, the best skilled IT professionals will seek a larger company or an IT vendor so they can improve their skills more broadly.
Outsourced IT service providers, such as Ideal Integrations, and outsourced IT security providers, such as Blue Bastion, have organizations filled with experts for IT projects of all kinds, and we have the staff to accommodate surge needs for our clients. Also, because we work for many different clients, we are able to obtain volume pricing from suppliers unobtainable for SMB clients.
Once an organization decides to outsource, it needs to interview vendors carefully.
SMBs must ask their potential vendor about capacity and capabilities. They also need to ask themselves critical questions about the role they want that vendor to play.
Does the vendor have enough staff for everyday needs as well as potential surges?
Will the SMB want the vendor to replace its current staff or compliment it?
Will the vendor be able to handle your legacy IT needs?
While many debates focus on pure outsourcing versus in-house IT resources, the reality is that often a hybrid combination provides the best option for an SMB. In-house IT resources can focus on the key needs of the SMB and become the business experts who know the business best.
These experts then guide the outsourced IT experts who will then advise the organization how to best deploy the vendor’s specialties (network design, IT security, etc.).
Making the Right Choice
The right choice for an SMB will be the vendor that has the expertise, can communicate well with SMB contacts, and makes the SMB executives feel comfortable and secure.
However, just remember that IT vendors can also be SMBs in financial trouble. Ask hard questions and make sure they have the financial security to be around long term.
If your organization is considering outsourcing, contact Ideal Integrations (IT Services) or Blue Bastion (IT Security) today. We welcome the opportunity to show how hard we work, our expertise, and how we can be the best option for your organization’s needs.