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Outsourcing as Business Strategy During Recession

How can a business thrive during an economic downturn

How can a business thrive during an economic downturn

How can a business thrive during a recession? 

Like earthquakes, floods, tornadoes, and bushfires, a recession is inevitable in businesses. This kind of hump shouldn’t be looked at negatively because it can push business owners to be smarter and more strategic about how they run their businesses. 

In a changing economy, selective outsourcing enables you to develop more adaptable expenses. It allows you to refocus and to pay special attention to your business resources. Further helping you to scale your operations and to prepare you for what lies ahead, may it be financial crises or economic downfall. 

 

What is a Recession?

Recession is a period in the business cycle that occurs when there is a significant decline in economic activity.

A nation is in recess when the economy is experiencing: 

  • Rising levels of unemployment 
  • Negative gross domestic product (GDP)
  • Multiple business failures
  • Declining measures of income
  • Crashing stock markets 

Nevertheless, a recession is considered normal in the economy and business cycle. 

 

Why are Outsourcing and Recession Related?

Before the COVID-19 Global Pandemic, the world experienced the Global Recession during the years 2007-2009. Some iconic brands like IBM, Apple, and Cisco were impacted, but many startup tech companies closed down. In fact, according to reports, 1.8 million small businesses went under and about 8.7 million jobs were lost.

With COVID-19’s continuous devastation on the resources and financials of firms, we can safely say that it has impacted more or less 90% of businesses around the world. Despite all these, business leaders think the future is still bright. 

A recession may be terrible but looking at the big picture, it gives entrepreneurs opportunities to innovate. And one in demand innovation that businesses of all sizes are jumping into is outsourcing.

To further emphasize the benefits of outsourcing, let’s dive right into case studies of how outsourcing services can help organizations amid a recession:

industry giant who survived during the 2008 financial crisis

Google

Google is continuously scaling effectively and it is quite surprising. It has encountered various recessions way back, but it is still one of the best companies in the digital age. 

Some of its success can be credited to its talented team. Google has been outsourcing Information Technology (IT) services for a long time. In fact, last 2018, the number of contract workers of Google outweighed its direct employees. These outsourced talents help maintain the business stability and profitability. 

 

Apple

While it is well known that Apple Inc. outsources manufacturing from China, some people are still unaware that one out of every three Apple engineers is outsourced. In fact, Apple is still outsourcing to date. 

According to Tim Cook, Apple’s former Chief Operating Officer (COO) and current Chief Executive Officer (CEO), the company became more resilient during the past economic downturns they encountered and that they believe in investing during downturns. Besides, the demand for technology is not going away anytime soon and they will still invest for the long-term. 

 

Skype

If the founders of Skype had not outsourced with Estonian app developers to handle the back-end development of the application, Skype would not have been a part of our lives right now. 

The business initially outsourced the developers on board as partners. Skype arguably would not be what it is now if the company had been unwilling to outsource work to the suitable engineers in Estonia. 

 

Cisco

During the 2008 Global Recession, Cisco managed to stay afloat during the economic downturn turmoil by downsizing through outsourcing. 

In order to establish market leadership and expand into new markets, Cisco has effectively utilized partnership and outsourcing as strategies.

 

Microsoft

Microsoft’s massive workers are composed of outsourced employees. It was noted by Michael Simms, Microsoft’s Chief Procurement Officer, that these workers are experts in providing their services to the company. 

 

Netflix

In spite of the crisis, Netflix was able to capitalize its creativity and innovation to establish itself as a pioneer in streaming on-demand consumer video. 

A key to their success was outsourcing– it made the company’s agility increased and they were able to focus on boosting their competitive advantage in the marketplace.

 

IBM

IBM has created the biggest long-term impact in the tech industry. The business itself offers outsourcing for a variety of tasks, but it also outsources its needs from other countries and partnerships. During the 2008 Global Recession, IBM signed a number of outsourcing contracts. 

13 Proven Business Strategies to Help Businesses Stay Afloat During and Economic Recession

13 proven strategies during recession

In times of economic recessions, consumers prioritize their finances and reduce their spending. Businesses often reduce prices, cut costs, and postpone new investments as sales begin to decline. The cost-cutting for marketing is often slashed and this is where companies are making a mistake. 

Businesses that focus on the demands of their customers, handle their marketing budgets the right way, and swiftly alter their strategy, methods, and product offers in response to the changing demand are more likely to prosper than others both during and after an economic recession. 

Do not panic as there are business strategies that you can adapt in order to dance with the waves of an economic recession. So now let us give you some ways on how you should respond in times of economic downfall.

 

Focus on core competencies and current customers

Businesses need to concentrate on their products and services they know that will sell the best. You should focus most of your attention on marketing those best products and services to the past and existing customers and other potential prospects. 

 

Understand your customer’s current needs

Listening to your customers’ needs is most important at this moment. It’s also crucial to empathize with their struggles at this time because you’re not the only one affected during an economic recession. 

 

Don’t stop marketing

Businesses that continue on investing in marketing in times of downturn bounce back faster. This is the best time to focus on your branding and marketing strategies like search engine optimization (SEO) and promotion of your products and services. 

You could send emails to your current customers, follow up with other prospects that did not respond to you, check-in on past customers hoping to win them back, and post ads that can draw customers in, and post on your social media accounts. 

 

Task prioritization and delegation  

Leaders should maximize their time as it is one of the business’ most valuable resources during a recession. It must be assured that the little time you have be saved for tasks that will greatly benefit your business.

 

Keep in touch with your employees

It is essential that you also check in on your employees as they are also feeling stressed and uncertain about what the future holds. It is also worrisome for them thinking that they might lose their jobs. 

 

Don’t give up 

A recession isn’t the end for everyone’s business, but it is important to make the right decisions and be strategic in order to succeed in the downturn. This is the chance for entrepreneurs to be more flexible and agile to be able to adapt to changes arising. 

 

Rethink your product and audience

Now is the time to realign your products or services with the current needs of your customers. You need to rethink your strategies on selling and marketing and whom you are targeting. 

You might need to change the ways on how you manage your operations before and focus on outcome-based selling, hence prioritizing customer’s desired outcomes. 

 

Know your business’ finances

You need to know the financial status of your business. It’s crucial to prepare in advance for measures to protect your cash flow. This is the time that you should be monitoring your business’ financial reports and operations. 

 

Diversify your revenue streams 

You can increase the chances of your company’s financial survival if you create new means of generating income. 

The goal is to develop new income streams for your company in order to have backups in case one of your revenue streams is destroyed by the recession. It’s a common tactic to reduce risk and you should have several options considered.

 

Make smart cuts

Businesses tend to cut costs on sales or marketing budgets which makes their financial situations even worse. It is important to make the right cuts in order to stay afloat. 

 

Embrace the constant change 

We know that the only thing that is constant in life is change. The key to surviving an economic recession is being agile and flexible. This includes restructuring your system, realigning your employees, evaluating your products and services, and reviewing your targets and goals. 

 

Beat the competition

You should use this as an opportunity to win more customers from others as your competition becomes more unstable during a recession. 

You must stand out more than your competitors by providing better quality products, giving discounts, delivering great customer service, and the likes. 

 

Make long-term plans

In times of economic hardships, entrepreneurs tend to focus on short-term plans. But it is also important to make long-term plans that can help you build a runway for yourself that even the direst financial troubles may be overcome. 

 

4 Benefits of Outsourcing in an Economic Recession

4 benefits of outsourcing

Outsourcing during an economic downturn can be a skeptical move for some. However, it could help the company be more prepared in occurrence of economic recessions. Recession requires the company to implement change within the business. 

You can gain flexibility and efficiency by outsourcing, and you will not have to shoulder the burden of hiring talents. Ever since, more companies are using outsourcing services.

Let’s take a look at the benefits of outsourcing: 

 

Less stress for current employees

It is typical for layoffs to result in more work for the remaining staff during a recession. A great strategy to reduce additional stress and work is to outsource. 

 

Lower costs

You can save money by outsourcing tasks that do not require a full-time team. Due to the lowered costs, you are able to keep the staff who are crucial to the ongoing operations of your company.

 

Improved economic efficiency

Higher-level employees may wind up wasting time on low-value tasks when work responsibilities get shifted among a pool of employees that has decreased due to a recession. This dilemma can be resolved through outsourcing before it affects small-to-medium-sized businesses. 

 

Better benefits for current employees 

Benefits for employees may be lost as a result of cost-cutting measures during a recession. However, if you outsource specific departments such as Human Resource, Accounting, IT, or Marketing, you will not have to worry about paying their benefits. As a result, you can continue offering benefits to your current workers. 

To sum it up, it is difficult, but not impossible, to help your company survive a recession. So for the next time the economy falters, equip yourself with the correct principles! Devise a number of back-up strategies, and be prepared for the future based on the changing landscape that may arise. 

 

Magellan Solutions Can Help Your Business Survive the Effects of Recession

Now is the best time to make the biggest investment for your company! 

Get an outsourcing provider who is trustworthy and reasonably priced to help you achieve your business’ objectives.

Here at Magellan Solutions, we take pride in being one of the best service providers for businesses. We have more than 18 years in the industry, and on top of that, we are an ISO-certified and HIPAA-compliant outsourcing provider. We offer a wide range of outsourced business solutions, from customer service to lead generation. 

Contact us and let us assist you for your business needs.

TALK TO US!

Contact us today for more information.

    You can also contact our numbers:


    Toll Free: 1 800 371 6224
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    Janselle Miguel
    Janselle Miguel

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