Outsourcing is fast becoming a strategy that is not restricted only to Fortune 500 companies but also small and mid-size corporations across the US to boost enterprise value in a shorter time frame. It allows businesses to cut costs, scale rapidly, and focus on growth-driving activities, all of which have a measurable improvement in enterprise value. The several ways where outsourcing has clearly demonstrated to increase enterprise value quickly are:
Cost Reduction that Enables Growth
Outsourcing of corporate functions has shown consistent effectiveness in reducing operational costs. Outsourcing typically frees up resources for strategic investments that drive value for any enterprise. According to Deloitte’s Global Outsourcing Survey, 70% of organizations cited cost reduction as their primary outsourcing goal, with 57% of surveyed executives reporting that outsourcing helped them meet or exceed their cost reduction targets.
Example: Slack outsourced its initial app design to MetaLab, allowing it to keep costs low while rapidly developing a polished product. This efficiency contributed to Slack’s swift market growth and ultimately led to its $27.7 billion acquisition by Salesforce.
Flexibility and Scalability to Capture Opportunities
Outsourcing provides opportunities for expansion or contraction in response to market needs and allows companies to serve it better. A study by Deloitte in 2020 indicated that 55 percent of companies engaged in outsourcing for flexibility, which remains a critical dimension of scale.
Example: Alibaba outsourced its IT and website development needs to offshore teams in its early years. This decision allowed Alibaba to grow quickly while keeping costs manageable, helping it evolve from a startup to a global e-commerce leader valued at over $485 billion.
Access to Advanced Tech, Skills and Technology
In the case of outsourcing, companies have specialized skills and advanced technology at their disposal, which would be too costly and time-consuming to develop internally. Another survey by Deloitte indicates that as many as 49% of businesses outsource activities in order to have new capabilities and resources that lead to speedy growth.
Example: Apple outsources a large chunk of its manufacturing work to Foxconn in China. Foxconn hosts production work without concern for R&D, and Apple focuses on product innovation. This partnership has helped Apple stay ahead of the curve in innovation in a fiercely competitive landscape by leveraging advanced tech & skills.
Strategies for Creating New Value Through Improved Customer Experience
Focusing on consumer service undertakings can optimize customer satisfaction and loyalty, which is paramount for enterprise value. A PwC study found that consumers mention that customer experience determines their final purchase decision by almost 73%, thus justifying the need for institutions to develop responsive customer service teams.
Example: As Airbnb manages significant volumes of international customer demand, part of its customer care operations has been outsourced to ensure efficiency. This strategy is one of the factors behind the high level of customer satisfaction at Airbnb. Currently, Airbnb’s worth is over $100 billion, and part of this is because of the excellent customer experience it delivers.
Faster Time-to-Market for Products and Services
Outsourcing can reduce the time needed to develop and launch new products in industries where innovation and rapid evolution are observed. A KPMG study found that 54% of companies reported improved speed to market as a benefit of outsourcing.
Example: WhatsApp outsourced its app development to an Eastern European team, reducing its time to market at lower costs. This rapid development contributed to WhatsApp’s meteoric growth and subsequently made it a key company for acquisition by Facebook. At the time of acquisition the valuation of Whatsapp was a $19 billion.
Risk Mitigation and Regulatory Compliance
Outsourcing compliance and risk management functions can help companies manage regulatory requirements effectively. A Deloitte study found that 48% of corporations specifically use outsourcing to manage and address regulatory and statutory compliance requirements. This helps organizations to stay compliant with fewer resources.
Example: Microsoft outsources certain compliance functions to third-party experts, helping it navigate the complexities of global regulation more efficiently. This risk mitigation approach to manage compliance has helped Microsoft easily navigate a complex geo-political and diverse market across the globe, leading to a stable market valuation.
Focus on Core Competencies for Growth
Outsourcing non-core activities allows companies to focus capital & other resources on their primary business functions, which is essential for growth. In a survey conducted as part of a study by the Global Alliance for Outsourcing Services, 83% of organizations said that outsourcing non-core functions helped them focus more on core business activities, directly contributing to value creation.
Example: WhatsApp’s compact team concentrated on expanding its user base, while outsourced teams took the lead on product engineering & development. This approach helped WhatsApp scale rapidly, leading to its efficient expansion.
Conclusion
Outsourcing is a growth strategic approach for rapidly increasing enterprise value. Companies like Slack, Airbnb, and WhatsApp have used outsourcing to focus on core growth activities, access specialized skills, and respond quickly to market demands—all of which drive value. The impact of outsourcing on flexibility, customer experience, and speed-to-market makes it a powerful tool for enterprise growth in today’s competitive landscape.