New research has shown that spending on outsourced services in the private sector continues to increase, with the latest industry findings showing it has risen to £30bn in the last two years.
The findings, by the Information Services Group (ISG), show that commercial spending has shifted its focus too, with smaller companies seeing the benefits of restricted contracts.
Smaller deals, larger volume
The data from ISG shows a defined shift in trends.
The private sector, which has seen spending on outsourced services rise to more than £50bn in the last two years, is taking on more and more large and complex contracts. Conversely, in the private sector, the size of deals is being reduced.
Smaller and more clearly defined contracts are being agreed. Company benchmarking has shown that targeted areas are being outsourced, largely picking up on specialisms outside of normal business operations.
A partner at ISG, Luke Mansell, commented on the findings, saying that increased cost efficiency is the reason behind the growth in spending. Mansell explains this is certainly the case with the public sector, though the private sector is also seeing it as an increasingly ‘attractive proposition’.
Outsourcing finance solutions boosts finances
One area of business that SMEs in particular have sought external expertise is for accounting solutions. Proven to reduce costs, this technique helps a business ensure compliance and competitiveness.
It also offers small business owners far greater visibility and understanding of their company’s financial position. Using the latest cloud-based solutions too, these records are instantly accessible while essential operations are easily automated.
The real value in outsourcing accountancy, however, is in the cost reduction it offers to firms, allowing valuable cash flow (which itself is likely increased through the outsourced accountants’ work) to be better optimised.
According to official figures in the U.S., in-house monthly spending on accounting is about $5,000 (£3,000), compared to a $2,000 (£1,160) spend on outsourced contracting. The figures also show that outsourced accounting can contribute to a 40% reduction in operational costs to a company.
Startups have a better chance when outsourcing
Bookkeeping, meanwhile, was found to contribute to a 4% lift in before tax profitability.
The benefits of outsourcing could be even more profound though; the same findings also reported that half of all startups fail within the first five years of being in business. Of these, 70% take their financial management and bookkeeping in-house.