If you were asked why you’re outsourcing, cost savings would surely be one of your reasons. And, if you were asked how much, could you really give an estimate worth considering? Or, are you so way off the mark, you end up making a fool of yourself? It may not make you feel better, but it’s good to know you’re not the only one doing it wrong. Many people get their numbers wrong more often than you’d expect.
Get it right by checking out these three things that you’re probably doing wrong when estimating how much they actually save from outsourcing and compare your numbers with the results you get from a savings calculator.
#1 People often make the egregious mistake of estimating their outsourcing savings based ONLY on their employees’ hourly rates back home.
Hourly rates are just that. Hourly. Whatever rate you pay your employees is just a small portion of what you’re actually spending for their continued employment in your company. Think of the taxes, benefits and other forms of compensation you’re spending, and you’ll realize it’s not worth the investment if you’re only going to hire two or three people for jobs that don’t need to be brought in-house.
Cut out the amount it would have cost you if you hired someone new from your total general and administrative costs, and you’ll surely see that you could have greater savings when you outsource rather than hire in-house.
#2 Focusing too much on getting outsourced staff with the lowest rates could blindside you.
There’s another factor to consider when outsourcing. What you don’t see included in those ridiculously low rates are the extras you may be charged later. These “extras” include holiday pay; in the case of Filipino employees, each person receives a 13th-month bonus based on the number of months they have worked at the company.
Another consideration is your future expenses on new (and better) equipment and tech upgrades that are necessary for remote work. You and your service provider have a shared responsibility for these. Leaving these things to your provider can lead them to cut corners and widen their profit margin if they were to remain viable for the long-term.
An outsourcing company that’s able to distribute these costs and then charges clients with a mid-range monthly fee (a little more than what the competition charges) can have you standing at a more comfortable financial position after a year or two. To achieve sustainability in your outsourcing strategy, focus on the long-term benefits rather than short-term gains.
#3 You’ll be surprised to know that many people don’t realize that the perceived value of money is not the same everywhere.
A tall, hot, steamy cappuccino or latte that normally costs $3.15 in New York is enough to buy someone in Manila three simple meals in a day. And so, the kind of low-cost labor that outsourcing provides is not equivalent to cheap and low-quality work. You can have a trained, college-educated worker in the Philippines working for you full-time for only a small fraction of what you actually pay your American employee.
It’s a fallacy to think that the value of money is the same everywhere and that the lower rates that companies pay to their outsourcing workers are as restrictive and exploitative in nature as the cheap hourly rates that some companies in the United States pay their transigent laborers.
The average monthly salary of a call center agent in Manila is around $400, with room to move up. That’s more than enough to cover monthly bills and groceries for a family of four. Now, contrast that to how much you’ll need to earn in any city in the United States, and $400 won’t even last for a week.
If you really wanted to know how much you’ll be saving when you outsource and what other underlying factors (from financial to socioeconomic) you’ll have to consider before you begin, set up a meeting with one of our outsourcing consultants. He’ll listen to your needs and provide suggestions on how you can best optimize your outsourcing strategy.