The Rise of Outsourcing in the Age of Remote Work: A Cost-Effective Alternative for Businesses

Throughout the pandemic, many jobs shifted to remote work arrangements given the fear of the spread of COVID-19. The shift to remote work in 2020 was done swiftly for public safety concerns. However, a few years later after the dust has settled, many organizations are reflecting on their employee work arrangements with more clarity now that those health concerns have eased.

With the realization that many jobs don’t need to be on-site in order for companies to stay productive, many business leaders are beginning to see the benefits of outsourcing these positions altogether. This allows them to unlock further cost efficiencies and growth opportunities that domestic remote workers do not provide.

At the same time, outsourcing continues to become more accessible to small and medium-sized businesses thanks to technological advances and better global connectivity. In fact, a recent Clutch survey found that 83% of small businesses will maintain or increase their spending on outsourced business services in 2023.

With both of these forces at play, companies are redefining what their workforce will look like over the long term, taking advantage of our globalized marketplace to become more profitable and agile for the economy of the future. Continue reading below as we explore these trends further and uncover what the future of outsourcing will look like.

Remote Work & Its Rise in Popularity

It’s no secret that remote work has grown in popularity in recent years, largely spurred on by the pandemic. Pre-pandemic, only 6% of employees worked primarily from home and about 75% of workers had never worked remotely. But, during the height of the pandemic in May 2020, over one-third of employees were working from home, according to the National Council on Compensation Insurance.

At the same time, technological advancements have made this work arrangement possible, which likely wouldn’t have been feasible a few decades ago. Even still, many experts agree that remote work would have become inevitable for many positions due to these advancements, though the recent push was ushered in more readily because of the pandemic.

With increased connectivity via the Internet and enhanced cybersecurity programs, remote work has become commonplace for many white-collar workers–without employers feeling like they're compromising on productivity or network security.

The workers themselves enjoy the lack of a commute, having more flexibility over their schedule, and a better work-life balance overall, among other benefits.

On the other hand, employers can take advantage of lower costs if they’re not managing a physical office space, a larger pool of talent that’s not limited by geography, and increased productivity by workers who are more satisfied with a WFH arrangement.

Outsourcing as a Cost-Effective Alternative

Remote work isn’t the only option available to employers who want to optimize their workforce for the modern age and take advantage of a global talent pool. Another viable alternative is to manage offshore teams through outsourcing.

For those who are unfamiliar, offshore outsourcing is the practice of hiring external service providers located in a different country to perform business functions or services. Offshore teams can perform a wide variety of services, including customer support, data entry and analysis, manufacturing, and more.

Organizations utilizing offshore outsourcing can improve their competitive edge and become more efficient in today’s fast-paced economy, even more so than what’s possible with a WFH workforce. Let’s dive deeper into the benefits of offshore outsourcing.

Cost Savings

Managing offshore teams allows organizations to take advantage of lower labor costs in other countries, primarily in developing nations. This is viewed as one of the primary benefits of offshore outsourcing, which can help companies improve profit margins and reduce operating costs.

In some cases, companies have been able to save up to 40% in labor costs by moving positions offshore, as reported by the Wall Street Journal.

Access to Skilled Workers

Offshore outsourcing can also help businesses gain access to specialized expertise and talent that may not be available locally. This can help businesses become more effective and efficient with their operations, which in turn makes them more competitive in the marketplace.

This is particularly beneficial to smaller businesses; a Clutch survey shows that 26% of companies with 10 employees or less outsource in hopes of working with an expert.

Scalability

In the same Clutch Survey, 19% of small businesses with 251-500 employees reported using outsourcing primarily to scale their business.

Thus, organizations that manage offshore teams have the flexibility to scale up or down their operations quickly in response to changing market conditions and business needs.

Better Efficiency

Above all, outsourcing can help businesses become more efficient with their resources, including both time and money.

With this, companies can focus more on their core offerings, and allow offshore teams to manage support services and tasks–all at a lower cost than they’d pay for on-site workers to complete them.

The Relationship Between Remote Work & Outsourcing

With the general and widespread success of WFH in recent years, it has become evident to employers that they don’t need to rely on an on-site workforce in order to complete their operations successfully.

Concurrently, a tight labor market that has endured for most of the past few years has sent domestic wages higher as labor shortages persist.

Taken together, these two factors have allowed–or even pushed–companies to explore other staffing alternatives that could provide further benefits and cost savings. In many cases, they’ve turned their sites beyond the country’s borders. In other words, an increasing number of businesses today–both large and small–are exploring the benefits of offshore outsourcing.

Business leaders have recognized that outsourced teams can do the same, if not better, work than domestic remote workers, but at a much lower cost. According to the Wall Street Journal, in August 2022, 7.3% of U.S. senior managers surveyed by the Federal Reserve Bank of Atlanta stated they were moving more jobs abroad as a result of remote work.

Some of the most common positions that companies plan to outsource include services like IT, digital marketing, legal, finance, development, and customer support, as reported in a recent Clutch survey.

Remote work trends seem to have eased among workers and businesses domestically since the height of the pandemic, though don’t expect WFH to disappear completely. However, there is no guarantee that remote workers will keep their positions as their employers see the cost benefits of moving them to offshore teams when possible.

Accessibility of Outsourcing for Small and Medium-Sized Businesses

Previously, outsourcing was only accessible to large corporations when it first became popular at the turn of the 21st century. But, over time, outsourcing has become much more accessible to small and medium-sized businesses.

This is largely due to advancements in technology and the Internet, which have brought about better connectivity among the global workforce without the barriers that were present previously. Plus, outsourcing as a labor practice is much more widely used and trusted than in earlier years now that larger companies have been so successful by relying on it for decades.

Particularly, the widespread shift to the cloud and an increased reliance on cloud-based systems and work processes have driven this change. Before, larger organizations used sophisticated VPNs and networks to enable access to their on-premises resources for a global workforce. This was often limiting to smaller organizations that didn’t have the resources or capacity to put these technologies into play, meaning outsourcing wasn’t an option for them.  

Now, thanks to the cloud, SMBs can much more easily access global talent and have it work within their cloud-based systems and processes. Smaller organizations can uniquely benefit from outsourcing as an employment solution, which can help them transform their operations and promote sustainable growth.

Outsourcing in Action at Assivo

At Assivo, we serve a diverse client base spanning company sizes and industries, and we tailor our approach to each unique situation and set of circumstances. Our clients appreciate the tremendous potential of outsourcing partnerships, especially as it pertains to their long-term growth and profitability.

Take one of our clients, for instance, a rapidly-growing VC-backed FinTech company with over $100 million in private capital raised. Offering competitive financing to small and medium-sized businesses, they were quickly expanding operations but faced some roadblocks to scale–particularly due to the tedious underwriting process.

With delayed loans, slow onboarding, and even losing business to competitors, the firm knew it needed to find a solution to its labor-related bottlenecks.

After turning to Assivo and receiving a custom consultation, we staffed a team of six full-time associates to support pre-underwriting tasks that took away from the client’s valuable internal resources. We took on the tedious workload of gathering relevant financial statements, bank statements, and supporting documents and preparing them for the purpose of underwriting decision-making.

As a result, the Assivo team helped the client see immediate results with productivity and deal volume. This led to a further partnership between the two teams, allocating more than 30 Assivo associates to the pre-underwriting workflow. Soon after, the client was able to adhere to a strict turnaround time of 24 hours for decisions on all completed loan applications.

Thus, our team gave the client the freedom to focus on what they do best–purely decision-making and approvals–and allowed them to stop spending their resources on gathering and collating data. In turn, this made them more competitive in the marketplace, see increased bandwidth, and streamline their operations–all thanks to outsourcing.  

The Future of Outsourcing

The rise in remote work will continue to open the door for more offshore outsourcing by companies of all sizes–especially when it comes to high-paying white-collar positions.

Between 2010 and 2019, the global outsourcing market generated revenue growth of 45.5%, going from $93.1 billion in 2010 to $135.5 billion in 2019, according to Statista. Further, from 2020-2024, the industry is expected to post a CAGR of nearly 10% each year as reported by Technavio.

What’s more, Stanford economist Nicholas Bloom told the Wall Street Journal that about 10% to 20% of U.S. service support jobs like software developers, human resources professionals, and payroll administrators could move overseas in the next decade.

Offering better labor costs, increased productivity, and flexible agility that cannot be achieved by a domestic remote workforce, offshore outsourcing will only become more popular in the years ahead as competition in the marketplace continues to rise.

Across industries, Assivo is dedicated to serving our clients and providing them with our innovative and agile outsourcing solutions that are tailored to their unique needs. With deep expertise in business processes and technology, we help our clients stay competitive and reach new heights.

Contact us today to request your free trial and see how Assivo can help you unlock better efficiency and productivity.