Capitalize on the outsourced solutions wave

ARTICLE | October 22, 2024

Authored by RSM US LLP

The United States is in the midst of a productivity boom. Outsourced solutions are critical for harnessing this growth, allowing companies to maintain a competitive edge in a tight labor market without the need for internal expansion. Successful companies have leveraged outsourcing for years, but more recently, solutions have extended to include IT and risk, finance and tax, and human resources (HR), freeing up companies’ internal resources to focus on innovation and growth of the core business.

Recent data shows why outsourcing makes sense for businesses in growth mode. The Department of Labor reported productivity growth of 2.3% in the second quarter of this year. Simultaneously, however, hiring in the middle market has slowed; only 36% of executives said their companies added staff in Q3, according to the most recent quarterly RSM US Middle Market Business Index. Companies need more people to drive productivity and maintain key business functions, but adding internal employees has become challenging and costly.

Even so, midsize businesses are investing in growth. Increased capital outlays, which indicate more spending on technology and infrastructure, were reported by 44% of middle market executives in the recent RSM survey, and more than half plan to boost capital expenditure in the next six months. As demand for technology resources surges, the strategic shift to managed services is helping firms scale efficiently while optimizing emerging technologies such as artificial intelligence (AI) and automation.

“New opportunities and challenges are rapidly emerging, and outsourcing strategies enable companies to be more agile, giving them confidence that they have the right personnel in place for sustained success,” says RSM Partner and Financial Consulting Leader Stacy Dow. “The value of outsourced solutions and managed services is becoming much clearer.”

Continuity and compliance

Maintaining consistency within business processes is important for growth. But turnover in today’s highly competitive talent environment is inevitable. The loss of key employees typically results in process changes, sometimes even the need to restart entire functions from square one. In addition, as more baby boomers retire, companies risk losing essential institutional knowledge.

Moreover, baby boomers in leadership roles are set to transition trillions of dollars of assets to a new generation of business owners, as millennial and Gen Z cohorts take the reins. Those generations bring a greater focus on technical knowledge and process modernization.

Outsourced solutions and managed services can make this seismic shift easier, providing businesses with proven, successful strategies to integrate modern tactics and tools into critical business functions. They provide a more direct route to business transition by deploying digital solutions a younger generation is already accustomed to in addition to other solutions necessary for continued growth.  

Meanwhile, the compliance environment is becoming more complex, especially in highly regulated industries like health care and financial services, and as companies expand internationally. Many businesses also face quickly changing protocols around their supply chain and carbon footprint.

Heightened regulatory scrutiny can exhaust internal resources. Outsourcing can help companies keep pace and prepare for what’s coming next. Leading service providers regularly monitor regulatory developments to implement and maintain compliant processes.

Embracing the power of innovation

Technology can be a differentiator for successful businesses, but keeping up with innovation is often difficult. Many companies lack extensive internal technology staff, often resulting in tech investments that fail to live up to expectations. Take AI, for example: this technology shows great potential to improve business insight and operations, but process design and governance requirements present challenges. As more data is collected and moves more quickly throughout organizations, leadership must also contend with an expanding web of security and privacy standards.

An outsourcing or managed services strategy enables businesses to leverage broad technical experience. Providers typically have direct knowledge of specific industries as they serve multiple clients in the same sectors. In addition to providing more advanced resources to critical areas like AI, machine learning and data management, they can optimize existing solutions, resulting in improved efficiency.

Further, and perhaps most critically, an experienced managed services provider can help businesses bolster their cybersecurity at a time when cyberthreats are on the rise and protecting sensitive information and intellectual property becomes more challenging.

“Technology integration is an important element of maintaining successful operations and growing a business,” says Dow. “An outsourcing strategy can immediately make your organization more innovative, delivering advanced technology solutions that enhance automation, efficiency, insight and security.”

The takeaway

An outsourcing strategy offers numerous benefits to midsize companies, including consistent costs and flexible resources. With outsourced solutions and managed services, a business gains improved visibility into expenses, enabling effective long-term budgeting and planning.

During peak seasons such as tax time, technology rollouts and heightened selling periods, businesses can scale up outsourced personnel and then adjust levels as necessary. This approach ensures businesses pay only for the coverage they require, providing a level of responsiveness and agility that traditional in-house teams can’t match.

With options ranging from finance and tax to cybersecurity, outsourced solutions and managed services are designed to align seamlessly with the growing needs of companies in all industries, inspiring elevated productivity and stability that allows for focus on continued growth.