While outsourcing culture started in the IT sector, it is now ubiquitous in several areas of a business. Companies now find themselves managing a range of external advisors and suppliers to allow them to focus on their core business functions.
AMC’s series, Halt and Catch Fire, captures outsourced IT – or time sharing as it was called – brilliantly. Visionary and disgruntled executive, Jo MacMillan, is in the mainframe room of a large corporate office and notices the computers turn on. He wonders why they are off in the first place, and pitches the idea of selling the computers’ down time to other businesses. This gives a glimpse of the birth of outsourced IT.
Outsourcing started in the early 1980s when IBM and other companies started leasing out access to their mainframe. It exploded in the 1990s when mainframes became more accessible to smaller IT players. Not long after, IT services joined the mix and morphed into what we know today as managed IT services.
The marketing function had a similar outsourcing narrative, but it was less dramatic. Parts of marketing were always outsourced – such as advertising. It wasn’t until after the Internet boom that marketing was introduced to various new channels and strategies. As a result, businesses found it difficult to fully execute marketing activities internally and sought help externally. The birth of the SEO firm, the digital firm, the inbound firm, the boutique agency and the pay-per-click experts soon followed.
We see that within the span of 20 years, companies gained access to great talent outside their business for two non-core functions. What was next?
Bookkeeping always had an element of being outsourced. SME business owners dreaded doing their accounts and if they didn’t have the funds for a full-time accounts person, freelancers or bookkeeping agencies did this for them.
We are now five years into the cloud accounting movement and Virtual CFOs are tipping their skills into an outsourced world of SME service providers (if you want to learn more about how a VCFO can benefit your business, read more here). How it works depends on each business. In order to better understanding the different layers of outsourcing, this is the model Sequel uses to incorporate non-core expertise and we are also seeing it used successfully by our clients.
The Outsourcing Value Doughnut
The system works as a value doughnut. The challenge for us as service providers, is making sure our products and services match what the core needs, and that we are visible for SMEs to know we are good fit.