Most organisations approach outsourcing as a way to reduce costs. Studies suggest around 70% of companies that enter outsourcing arrangements do so with a view to making cost savings¹.
Quite often in early negotiations, the level of direct cost savings on offer is not as great as expected, which creates a misconception that there aren’t significant savings to be made. What is happening here is twofold: a misunderstanding of the true in-house cost of the sales function and a failure to recognise the full value of the benefits of outsourcing. According to one estimate, the average in-house salesperson’s real cost to a business is around 2.6 times that person’s salary¹. That estimate does not include the legal risks associated with direct employment.
On the ‘true cost’ side, many businesses – especially larger corporates – tend to see an outsourced sales function as a straight like-for-like swap: salesperson for salesperson. Left out of the equation are the existing on-costs associated with employing an internal sales force – costs which will be reduced or removed on outsourcing. These costs include recruitment and training and the associated impact on HR, finance, legal and other internal departments. In addition, an in-house sales team adds to the cost of transport and other equipment, floor space, technology support and even social activities.
While these costs are also incurred by an outsourced sales partner, they tend to be significantly lower because of the flexibility and variable cost structure of the outsource partner. When it is all toted up, various consultants and academics who have looked at this report that outsourced sales options are generally less, not more, expensive than in-house alternatives. The difference is becoming more pronounced as the cost of employing permanent salespeople rises.
¹Death of the Salesman – reinvent your sales function to create competitive advantage
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