A recent study from Forrester says that companies that do outsourcing save 12-17% in business expenditure as compared to doing the same work in-house. The savings also take into account all that the company spends whenever they transition from working in-house to an outsourcer, not just the contract itself. It covers the legal fees, federal fees, the amount they pay employees in severance fees and local taxes.
This figure does not include the cumulative discounts that a long-term outsourcing deal gives companies, so it is possible for this number to go up, depending on the quality of the relationship the company has with the outsourcing company. This percentage also goes up when companies choose outsourcing to the Philippines, where labor is cheaper.
There are other intangible factors that companies get whenever they get involved in outsourcing in the Philippines. Workers in the country have skills that are may not be found in other Asian countries like India or Pakistan. They have technological expertise, high performance and low delivery costs. These valuable factors are not included in the savings calculations. Besides the reduced cost of operations, companies also get excellent people to work for them.
What does this all mean? Basically, saving money on operations means a lot in outsourcing. If you ask any company what their decision maker wants to achieve, 70% will tell you that they want to focus on reducing the cost of operations, or allocating that amount to get more up-to-date software. To give you a clearer picture, the global outsourcing market is estimated to be at $77 billion per year. Right now, only about 30% of US companies outsource their operations, which means that the potential global outsourcing market could be up to $110 billion. If you estimate that companies save 15% (a modest average), that means the industry can save around $10 dollars every year.
This is money companies can use to improve their business. It gives them room to grow and increase their market presence, train more skilled people, get better software and go into industry research. However, this is something that companies cannot do because the outsourcing is not as widespread in the US as many people think.
Outsourcing to the Philippines will allow companies to realize their full potential. Just calculate what companies can save every year on operations expenses. There is definitely no reason why these companies would not consider outsourcing, especially if it will improve their business.