Should you outsource just to cut costs?

Key takeaways

Outsourcing to reduce costs works for repeatable, measurable work, but a cost-only decision often backfires. The cheapest hourly rate rarely gives the lowest cost per task once rework, supervision and lost customers are counted. Aim for three outcomes together: lower cost per task, faster service and hours returned to the team.

• Cost per task, not hourly rate, is the measure that matters.
• Across our client work, back-office cost per task fell by 42%.
• The cheapest provider often costs more once rework is counted.
• Do not cut customer-facing capacity to save money.

Does outsourcing actually save money?

It usually does for repeatable support and admin work, because managed offshore teams at an indicative £9–£18 per hour cost less than UK staff at about £16.27 per worked hour plus overheads, and because a documented process reduces rework. It does not save money on work that needs constant checking or on volumes too small to justify setup.

• When should a UK business consider outsourcing?
• Work out the ROI of outsourcing

Where do outsourcing savings come from?

Savings come from four places, and the hourly rate is only one of them. The other three, rework, idle time and senior hours, are often larger.

• Lower hourly cost for repeatable work.
• Less rework, because the process is written down and checked.
• No paying for idle time between peaks.
• Senior and owner hours moved to higher-value work.

• Work out your cost per task before you outsource

Why do cost-only outsourcing decisions backfire?

Because they pick the lowest rate and ignore the rest. A cheap provider without supervision produces errors your team fixes. Long minimum terms lock in a poor service. Cutting in-house staff before the outsourced process is proven leaves nobody who knows the work. The saving on paper disappears in practice.

• The hidden costs of outsourcing
• The disadvantages of BPO and how to manage them

What should you aim for instead of cost alone?

Aim for three measures together: cost per task, service speed and hours returned. If cost per task falls but replies slow down, the saving is costing you customers. If replies speed up and owners get hours back at a similar cost, that is a good result even without a headline saving.

Which processes save the most?

The biggest savings usually come from high-volume back-office work currently done by skilled or senior staff: data entry, order processing, invoicing, CRM updates and document chasing. Customer contact often saves less on cost but gains more on speed and revenue.

• Skilled staff stuck doing admin? What it costs you

What about existing staff?

If outsourcing means existing employees' work moves to a provider, TUPE may apply and staff may have the right to transfer. Many SMEs avoid this by outsourcing growth, cover and new volume rather than replacing people, or by moving staff to higher-value roles. Get advice before announcing any change that affects jobs.

• TUPE and outsourcing
• How to tell your team you are outsourcing

How do you check the savings are real?

Measure before and after on the same basis. Record cost per task, reply times and internal hours for at least two weeks before the change, then compare monthly for the first quarter. Count everything: provider invoices, your management time and any rework still done in-house. If the saving only appears when those are left out, it is not a saving.

• Baseline cost per task and service speed before the change.
• Monthly comparison for the first three months.
• Internal hours still spent on the process.
• Customer complaints and rework against the baseline.

• Work out your cost per task before you outsource

What does this look like in practice?

A pattern we see in UK logistics firms: the first provider chosen on price alone misses delivery queries at peak, and the in-house team ends up checking every reply. Switching to a managed team with supervision and a weekly scorecard costs a little more per hour but less per resolved query, and the in-house team stops double-handling.

• See client work
• BPO Solutions for UK businesses

Cost-saving checklist

Check these before outsourcing for savings.

• Measure cost per task, not only hourly rates.
• Include rework and supervision in both options.
• Set targets for cost, speed and hours returned.
• Avoid long minimum terms until results are proven.
• Keep in-house knowledge until the new process is stable.
• Check TUPE if existing roles are affected.

Next step

Tell us where you expect savings. We will tell you honestly whether they are realistic and what else you should measure.