The Far and Efficient Future: Remote Staffing vs Outsourcing

Switching to a remote working regime has led the companies to different results. Some of them have had positive experience and managed to switch their processes smoothly into new format, while the others had to keep their employees in offices, as they failed to arrange the company’s activities under the present-day developments. A number of companies were in a better position to outsource non-core functions well in advance of the pandemic, which allowed them to focus on key business processes. Lyudmila Shusterova, Director for Strategic Development at BDO Unicon Outsourcing, shares her opinion on comparability of the notions of “outsourcing” and “remote staffing”, as well as on the probability of replacing remote specialists with outsourcing. 

COMPARISON OF ADVANTAGES

The first thing that comes to mind when a company wants to transfer responsibility for employees and building the processes of work payment is to outsource. This is the recipe that is often mentioned in various sources.

The post recently published on Facebook asks the question: “Have you built a process of cooperation with the self-employed in your company?” And what was the most popular response? - “Outsourced”.

Let's first define the terms. 

There is a business practice of outsourcing personnel – it is more correct to call it outstaffing. When employees are registered with a professional provider, the latter is responsible for staff records management, execution of documents, payment of remunerations, and submitting the necessary reports. However, it is not responsible for the quality of employees’ work.

At the same time there exists an outsourcing of business processes. There is a great difference between these two terms. It is important to understand what you expect and want to get in the end.

One of the main advantages of process outsourcing is that there is no need to spend money and energy on recruitment, onboarding and replacement of employees. The use of resources in towns with lower labour costs than in the central part of the country, economies of scale, and a more even distribution of projects among employees can significantly reduce staff costs. Besides, where the provider’s employee goes out of service, she/he is immediately replaced, without any negative impact on the client’s business processes. 

Thanks to switching to remote working regime the companies can also consider candidates for their open vacancies not only from the city where the company is physically located, but also from the regions. 

Moving forward the company also has to optimize its costs, improve the efficiency of personnel use, and that is where you should think about business process outsourcing. It is common knowledge that an employee uses all the time allotted to complete a task, although he/she could have done it faster if there were more of them. Thus, in order to increase utilization of work resources, it is possible to outsource some of the non-core processes as a further step. Alternatively, some companies rely on dividing their departments into separate companies that work both for the internal customer and provide services in the market.

The difference between the process execution by providers and the company.

The provider:

• utilises employee resources more efficiently;

• engages specialists of various grades in operations, depending on the level of the current task, and outsources the functions to the regions.

However, all these conditions can be met if there is a developed outsourcing market for the particular process. This is true for outsourcing accounting, payroll and HR records management, application support, individual production functions, IT infrastructure support, and call centers. 

Besides, outsourcing users often get access to the provider’s knowledge base and digital tools: chat bots, portal solutions, Employee self-service, RPA, OCR systems, and so on. 

Proper outsourcing allows you to minimise booth the cost of services and potential risks. For example, in case of outsourcing accounting or payroll processes, the provider assumes responsibility for the entire process transferred to it, it is responsible for the adequate transmission of information, payment of taxes, and submission of reports. It is the outsourcer who will have to pay any fines accrued as a result of the company’s incorrect actions, and deal with the consequences. 

However, outsourcing is not suitable for all the companies. If the client has no decision-making principles in place, its communication processes are not developed, and the company expects the provider to solve absolutely all its problems without any involvement and responsibility for the process, their interaction is unlikely to be productive, and to lead to any effective results. Trust and understanding of a common goal should be established between the outsourcing company and the client. Therefore, a proper process of communication, information exchange are of great importance. For example, our clients invited employees of working teams to corporate events so that the provider’s representatives could better understand how the client’s company works and get to know the project team better.

The forced switch to remote working regime became a kind of test for a company and allowed it to assess the maturity of the existing work processes. If the company is able to adapt itself to new conditions, and employees continue to perform their tasks, then the company:

• has a properly-built IT-infrastructure;

• has implemented applications that allow employees to maintain communication with colleagues or clients and not feel left behind the team;

• the management team has an understanding of how to coordinate staff and control work, that is, modern management technologies are used.

Besides, we have found out that lot of our partners do not take into account a number of important expenses when switching to remote work. For example, an increase in the number of remote employees of the company will require to reconfigure its architecture and software, and thus the company has to bear capital expenditures for maintaining the IT-structure, paying bills to the provider, and connecting cloud systems. In this case outsourcing packages might turn out to be more profitable, where the information system is located on the provider’s servers (so-called SAAS or cloud solutions), which can reduce the load and costs of your own. 

KEEP OR OUTSOURCE?

As a rule, it is much easier for the companies that have cooperated with remote employees before or have had a positive experience of large-scale remote work during self-isolation to outsource business processes from the provider. But if the company’s experience was negative due to an insufficiently-optimized system for the present-day developments, the management is more likely to worry that they will lose their management tools and control over the situation. 

However, even if the company is not ready for remote work now, the top management has two ways of further development. One can either choose a long-term reconfiguration of the infrastructure and management system on its own, or use outsourcing and the model for switching to remote process execution proposed by the provider. Depending on the company’s needs, the counterparty will:

1. Share solutions on how to reconfigure the system in the most optimal way and correctly build management (including such best practices as SLA, KPI);

2. Provide a service team and a quality control system;

3. Make up for the missing resources of the company;

4. Offer IT-tools that will reduce labour costs associated with the employees and ensure business continuity; 

5. Assist you in the creation and implementation of a business process optimization roadmap.

Thus, it is impossible to compare the concepts of “outsourcing” and “remote staffing” on equal terms. Remote work regime allows you to reduce a number of expenses by searching for employees in regions with cheaper wages, giving up office space. However, the company reserves all types of risks of a particular process, IT infrastructure costs increase, and the responsibility for the business continuity also remains with the company. 

Outsourcing allows you to minimise risks significantly, as well as to get a number of so-called bonuses in the form of provider’s expertise and IT-solutions that are too expensive and inefficient to develop at your own expense. It is obvious that those companies that have successfully switched to the remote format of work will more often outsource its non-core functions to obtain the benefits listed above.