Study: SMBs Outsource More for Strategy than Cost Reduction

Ann All

As I wrote back in February, many experts look to SMBs to hold a little more steady on IT budgets than their larger counterparts during this year's economic downturn.


One area in which SMBs anticipate spending less than bigger companies, however, is outsourcing. According to a recent CIO Insight survey, just 8 percent of SMBs anticipate increasing outsourcing activities in 2008, vs. 15 percent of larger companies. That's a shame, since outsourcing can help SMBs grow their business, concludes a recent Achilles Group report.


According to an eWEEK story about the report, SMBs use outsourcing to focus more closely on core competencies while their larger peers put more emphasis on achieving cost savings. SMBs surveyed by the Achilles Group cite freeing up executive time and obtaining on-demand access to specialized expertise as their top reasons for outsourcing. Other reasons included cost reduction, performance improvement, ability to scale and access to best-of-breed technology and tools as well as desired business processes.


Achilles Group found that most businesses with 25 to 250 employees outsource at least two business functions. The most frequently outsourced functions are payroll, accounting, ERP, point-of-sale and CRM, according to the eWEEK story. The outsourced functions varied with the size of the business. For example, companies with fewer than 50 employees outsource payroll, benefits, recruiting, bookkeeping, IT desktop and e-mail, Web site and online marketing, financial engineering, IT network administration and marketing and lead generation.


Larger companies add more sophisticated functions such as talent management, compensation planning and even CIO/IT strategy. Interestingly, related to the last item, I wrote last August about SMBs that utilize the services of interim CIOs and even "virtual CIO" services that offer advice via phone or e-mail.


Some companies opt to bring outsourced services back in-house after building the appropriate infrastructure and processes to handle the tasks themselves, notes the Achilles Group. The ability to move back and forth between in-house and outsourced approaches offers a key business advantage.

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