How Much Money Can You Save by Outsourcing?

Outsourcing is the fast-spreading practice of contracting third-party services to third-party providers. It makes entrepreneurs question, “How much money can you save by outsourcing?”. Reality shows that outsourcing has become a solution for businesses looking for ways to reduce business costs without compromising quality. 

Businesses of all sizes can experience cost savings through outsourcing. From large companies, small or mid-sized companies, startups, to solo business owners, outsourcing brings benefits to all.

Outsourcing can take different forms. Each of them depends on where the outsourced staff is based. Although they all reduce business costs, offshore outsourcing is the most optimal cost-saving solution. 

Based on where the outsourcing agencies are located (when compared to the hiring firm or professional), the three outsourcing categories are: 

• Offshore: Outsourcing to a foreign, distant country. 
• Nearshore: Outsourcing to a nearby country with similar time zones.
• Onshore: Outsourcing within the same country. 

You know how challenging it is to run a business, especially if you manage everything in-house. If you are considering outsourcing, you want to see numbers, real-life cases. And that’s what we’ll do today: see how outsourcing reflects in financial savings and increased ROI (returns on investment). 

Outsourcing and Its Value for Businesses

Outsourcing enables businesses to significantly cut down costs while improving their efficiency, regardless of the business size or field. 

Not long ago, when hearing the word outsourcing, most people thought of virtual assistants, call center representatives, or customer support. Yet, outsourcing needs have grown a lot. Nowadays, businesses can outsource a myriad of functions and roles to remote teams. Click here to find out some of the roles you could outsource. Yet, bear in mind that there’s almost no limitation to the roles you could outsource. This broad availability of professionals is invaluable to businesses in need of specialized personnel. 

Deloitte’s Global Outsourcing Survey 2024 revealed that third-party outsourcing keeps growing. Outsourcing back-office responsibilities has been and continues to be a common practice. However, companies are also focusing on other duties that involve other specific skills (like marketing and sales). The survey showed that the combination of skilled talent and cost reduction is the main reason for outsourcing. 

To take full advantage of their outsourcing programs, companies are defining and adopting strategic measures to create more value. 

Hidden Costs of In-House Staffing (and How Outsourcing Can Save You from Them)

You don’t need to give it much thought to realize that hiring in-house personnel involves more than paying salaries. These are hidden costs that may not seem obvious to the employees, but hit hard on the businesses’ bank accounts. 

These costs can be direct and indirect. The main ones include: 

1. Direct costs: 

• Health insurance
• Retirement plans
• Paid leaves
• Office space and utilities
• Hardware and software 
• Salaries

2. Indirect costs:

• Recruitment
• Training
• Management expenses

Direct costs

We briefly mentioned some of them, and we included intangible benefits at the first rows of our list. 

These are typically known as “benefits”. 

We are talking about paid leaves, supplemental pay, insurance, retirement plans, and any other legally required depending on the country or state.  

“The Employee Costs for Employee Compensation”, a news release by the U.S. Bureau of Labor Statistics, analyzes the costs of all civilian, private-industry and state and local government workers. It shows that for private employees, the average cost is $44.67/hour. Of those $44.67, $31.47 corresponds to wages (approximately 71%), and $13.20 corresponds to benefits (around 29%). 

Now, if we count all sectors, for each working hour in the U.S., employees pay $1 in benefits for every $2 in wages. 

This bar chart shows how many cents of every compensation dollar paid by the employer go to each major category of benefits. 

As a business owner considering the financial advantages of outsourcing, be wary of looking for business outsourcing companies with transparent fees. For instance, through Virtudesk, you’ll only have to pay a minimal set-up fee at the moment of signing. Then you’ll pay per hour exactly and only for the services you get, and for the time you need the services. If you no longer need a service, you won’t have to pay any layoff compensation. 

Now, what about office space and utilities? 

If your workspace doesn’t have space for new desks, you’ll have to consider moving. The price of renting offices or co-working spaces varies a lot. ACRE Real Estate Partners explains it. The average price per square foot can go from 22$ to 80$, depending on the region. And once you sign a contract, you’re tied to it for a long period. Take a look at their guideline on the factors that affect the office prices and find out another reason why you save money by outsourcing to remote teams. 

We grouped utilities together with office space as they will necessarily increase along with your workplace and workforce. Electricity, gas, Internet, water, phone lines, and waste disposal are  some essential services you’ll have to pay for. Outsourcing saves you from seeing those monthly expenses grow. 

Hardware and software add a lot to your budget, too.

There are essential devices your workers will need, depending on their tasks. Some hardware essentials may include: 

• A desktop or laptop
• A server for centralizing services, emailing, sharing files, printing, etc.
• Peripherals, such as keyboards or mice, and even monitors, are required if the tasks demand a dual-screen setup.
• Headset and speakers of good quality for clear communication. 
• Good webcams, if the job requires video conferencing. 

Regarding software, the prices can go from costly yearly licenses to monthly subscriptions. These subscriptions will vary depending on the number of users or usage time (in the case of Software as a Service or SaaS). We would also advise hiring an in-house IT technician or hiring a service for maintenance and troubleshooting. 

Do you have your calculator with you while you read?

Salaries? No, we didn’t forget them

We left salaries in the last place because it may be where you can save the most money when outsourcing. Here, it’s crucial to clarify that the big difference depends on choosing an onshore, nearshore, or offshore outsourcing service provider.

As published in Forbes, companies that outsource can cut their costs up to 70%. And the major factor is labor cost. Most business services providers count on a pool of skilled workers located in regions where labor costs are much lower than in the U.S. These companies usually mirror that in their pricing packages or fees. Visit Virtudesk’s pricing page and verify with your own eyes the affordability of the hourly fees for the different roles. 

If you run a business and have in-house employees, take your calculator, add the varied factors we mentioned, and estimate how much you pay for each of them by the hour.  

We are not suggesting that you change your current workforce for new, outsourced employees. We are simply recommending that you consider how much money you can save by outsourcing the next time you need staff to help you with certain tasks. 

Indirect Costs

Recruiting costs are significant investments. 

According to the Society for Human Resource Management, back in 2022, the average cost of hiring a new employee was already around $4700. Some employers estimate it can cost three to four times the job’s salary.  When outsourcing, it’s the outsourcing company that will cover recruiting costs and efforts (finding the right candidates takes effort and time, and time is money as well). 

Training new staff costs you money

Or you do it yourself, or you ask an experienced employee to train your new employee. In both cases, the time diverted from your main activity, the one that generates clients or gains, involves less money-making. There’s also the option to hire a trainer or pay an educational institution to do it on your behalf.  Here’s another financial advantage of outsourcing: they take care of it all and lead the onboarding process as well. 

Take Virtudesk, for example. We have our own academy where we train all our staff from basic to advanced skills. We embrace the importance of constant learning, and our team members regularly undergo new courses or training. 

Team management is not free

 If you are going through a peak season and you need to increase your staff, you’ll have to spend time managing them, or hire a team leader to do so. Here’s another advantage of outsourcing: the service provider usually has management tools, such as our Timedly,  that do most of the job, or professional management services to handle and empower your remote staff. And whom you can hire with no long-term commitments. 

Outsourcing: A Strategic Ally for All

Delegating certain functions to external service providers can benefit solo entrepreneurs, small and medium enterprises (SMEs), and even big corporations. With the assistance of external talent and expertise, companies can reduce costs, mitigate risks, and adapt to market fluctuations easily. 

For example, small and medium companies typically use outsourcing to fill skill gaps without having to maintain large in-house teams, while large companies use outsourcing services to handle immense volumes of customer interactions or administrative tasks with efficiency.

 A report by Data Intelo indicates that the global customer service outsourcing market is expected to reach $ 130 billion by 2032 (from $78 billion it reached in 2023). Companies report that they are adopting this advantageous model for two main reasons: enhancing customer satisfaction while reducing costs. 

Solo Entrepreneurs

For solo entrepreneurs, administrative and routine tasks become a heavy load that prevents them from moving forward. Being so time-demanding, these tasks don’t leave them sufficient time to focus on their core activity. Outsourcing benefits include allowing them to dedicate themselves to creating, producing, and growing their clientele. Usually, solo businesspeople find a solution by hiring a virtual assistant to handle tasks such as handling emails, scheduling meetings, arranging services, data entry, and billing. 

Startups

Startups have budget constraints; for them, achieving a positive cost-efficient balance is a key to survival and growth. Outsourcing helps founders reduce business costs by letting them access skilled employees at lower costs. Furthermore, it also gives them the flexibility to scale their operations without investing capital. 

WhatsApp, the messaging giant, is an irrefutable example of the financial advantages of outsourcing and how it fosters company growth. WhatsApp started with 30 full-time and 5 part-time employees in a small office in Mountain View. Since it was still being developed, the founders realized the power of outsourcing and outsourced to a Russian dev team the development of the iPhone version of the app. Outsourcing offshore allowed the in-site team to reduce costs, focus on their core competencies, and put their efforts on scaling operations. 

Slack, a collaboration tool with over 12 million daily users and 750,000 companies as customers, opted to outsource the development of its app to a Canadian agency. Likewise, it relied on outsourcing to expand its user base since its early stages. Later on, it also outsourced its customer support, marketing, and growth strategies to various companies. The company could launch the app faster and at lower costs taking advantage of the know-how and resources of their business service providers. Slack iterated its product quality integrating the feedback of their outsourcing service providers, and scaled its operation and reach incorporating a wider talent pool and customer base. 

Small to Mid-sized Companies 

For small to mid-sized businesses, outsourcing non-core functions helps them operate with efficiency. Delegating tasks such as administrative duties to a virtual assistant (VA), HR, IT support, or customer service helps them save time and improve efficiency. For example, a mid-sized company based in the U.S. could achieve monthly savings of over $20,000 solely by outsourcing IT, HR, and customer support services.

Back in 2023, a study carried on by Clutch surveyed over 500 small business owners or leaders. These companies had under 250 employees and operated in different industries. The majority conveyed they were confident in making it through a potential recession. 83% of them stated they would keep or augment outsourced services. They expected to reduce costs and bring new know-how to their teams. 

Here's a visual representation of the participants:

Large Companies

For large companies, outsourcing can bring transformative savings and ROI improvement. 

An example of how outsourcing can reduce costs is Shopify. After the layoffs of about 1,000 employees, Shopify started outsourcing most of its customer support to the Philippines. According to the CEO of the service provider company, Bryce Maddock, companies started delegating tasks to offshore teams “in a quest for cost savings”. 

Gigantic companies such as Google outsource services. Google started outsourcing AdWords support to call centers around the globe back in 2011. In 2014, they decided to outsource part of their software development. Nowadays, most of its workforce is comprised of third-party outsourcing contractors. 

How Virtudesk Can Support Your Outsourcing Journey

You might be a solopreneur, lead a small company, or manage a department in a large corporation. Regardless of your business needs and industry field, at Virtudesk, we have all it takes to provide you with a seamless, efficient, and cost-effective outsourcing experience. 

With us, you’ll access an increasing pool of skilled professionals in different areas. Some things you can expect if you decide to save money by outsourcing with us include:  

• Constant training: All our virtual assistants and professionals receive constant upskilling.
• Scalability: With us, you can scale up or down your staff based on your momentary needs.
• Expertise: We offer you immediate access to specialized professionals across diverse roles and industries. 
• Cost transparency: You’ll always know what you’ll pay. With no hidden fees, our service packages are clearly outlined, and you’ll always find one to fit your budget. 

Let your business and yourself achieve optimal functioning and financial growth faster by outsourcing with us. Schedule a free discovery call or call us at +1 (800) 470-8136, and we’ll be delighted to help you discover the wonders of saving costs by outsourcing.