In House

Criteria for Insourcing vs. Outsourcing Business Development

I have written extensively over the years as to why and when it makes sense to outsource business development primarily for economic reasons.  

That being said, when a company is considering business development to create a systematic and sustainable lead pipeline building process one must consider a number of criteria (not only cost).  

 

Let’s consider some of the issues:

Criteria

Insource

Outsource

Headcount

Will require allocation of resources and overhead.

Draws on Human Resources investments and resources.

Headcount will not need to be increased,

In fact you may gain an opportunity to reduce current headcount or overhead.  

No Human Resources overhead required.

Retention / Churn

Business Development staff are often looked on as entry level for Sales jobs. If so they are not hiring people with the right abilities (for business development) as sales requires different skills.

Hiring the wrong people will increase turnover and lower success potential for the insourced operation while at the same time incurring additional costs.

The provider is responsible for providing qualified and professional staff.

At ETI our staff retention record is second to none and the median tenure of an ETI Business Developer - will for the most part - be longer than of an insourced Business Developer.

Control

Everything done under your roof.  They are your employees and they are assigned to focus on your business only.

Perception is better quality personnel and management.

Perception is that you have less direct control as it is not under your roof.  However in reality you exert substantially more control - for example the ability to ramp and and down, messaging control, real time production levels and results monitoring etc.

In ETI’s case we provide as a deliverable complete transparency (far more than would normally be available inhouse).

Focus

Inevitably an insourced operation (in our experience) is rarely 100% focused on the business development task ahead.  Over time priorities change and in many cases general administration and account management activities creep in.

100% focused on the business development task at hand.

Fully accountable for results.

Productivity

Insourced operations are rarely as productive as outsourced ones.  

Result:  Lower throughput of leads into the Sales Opportunity Pipeline.

Generally speaking productivity levels in real terms of an insourced operation will be about 50% of the outsourced company meaning that to fill your sales opportunity pipeline you will require about 2X the staff levels just to match the outsourced solutions throughput.  (See our prior blog on this subject.)

At ETI, whatever the model (Hours / Pay for Performance or Hybrid) you get 100% for your investment.   

Product knowledge and expertise / Brand Representation

Insourced should be better with more invested in training and access to information.

However, if the business development task is to identify new business opportunities - i.e not sell or close the sale - then engaging in highly technical discussions when the need it to build interest and awareness, might be a minus not a plus,

Conversations should be focused on need/pain current solutions etc.

Conversations should be consultative … not sales or product oriented.

Focus is entirely on identifying in qualifying and quantifying potential.

In reality since ETI’s BD’s generally have longer tenure than insourced, they often have a better understanding of your solutions as well as the the applications within the target markets being called.

Hand off is only done once relevant criteria meets this requirement.

Management Expertise

Management expertise in Business Development is rarely available insourced - and if there it is usually focused on other activities.

Acquiring such expertise or reassigning internal management is costly and disruptive.

Extensive experience and expertise.

In ETI’s case it’s management team is unsurpassed having decades of experience in “making it happen”.

Generally speaking insourced operations cannot deliver the extensive experience of the outsourced solution provider.

CRM

Most companies today have a CRM.  However, few CRM’s (if any) are built to maximize Business Development productivity.

However, to optimize and drive the internal operation you will usually need additional licensing costs and the training and or consulting fees that go with that.

If you stay with the CRM as is, your productivity levels and the ability of management to effectively manage the activity will be significantly compromised.

In ETI’s case we have a CRM (i*Collaborator) built entirely to manage the Business Development process.  Even third party systems that “bolt on” too traditional CRM’s cannot match our state system.

Furthermore, ETI offers services to leverage traditional CRM API’s to push and pull data seamlessly giving you the best of both words.

ETI has also developed its own tools to allow its staff to operate in your own instance of Salesforce.com while leveraging ETI’s CRM to maximize productivity and efficiency.

Technology

Although the technology components today are largely commoditized (and relatively lower cost) an effective insourced operation must have the following capabilities.

  • Monitor live
  • Record calls
  • Mentor live
  • ACD

Some older systems do not have these capabilities and may require additional purchases/licenses.

Any outsourced operation worth its salt should have a state of the art PBX and or technology platform delivering all the functionality required.

Suffice it to say that the notion that cost and the perceived improved internal controls and quality of staff is often not true.  When comparing apples to apples you may well find that an outsourced solution (or an outsourced supplemental team) can more than match an internal effort both in terms of costs, results, brand delivery and the overall productivity of your sales effort.

 

Outsource or “do it yourself” B2B lead generation?

Certainly, the ability to develop in house resources to match the ability of a specialist company like ourselves appears to offer more potential.  Typically, the thinking is based upon the assumption that doing it in house offers …

  • greater control
  • greater expertise
  • a methodology for training/identifying future sales resources
  • and other significant cost savings.  

In other words the prevailing thinking is ‘we can do it cheaper and better’ in house rather than outsourcing to a 3rd party specialist!

On the surface, that seems like a simple cost-effective decision, especially when comparing with an outsourced operation.  However, the practical issues are far more complex with the result that most in house attempts never achieve the desired objectives.  And it is this failure that in effect reduces sales instead of increasing your profits.

The fact is that most organizations don’t have systems in place to control and track and manage in house tele-services / tele-prospecting activities.  That’s especially true for startups.  Success in winning new customers is far more complex than simply having you insist on a certain number of calls per day and providing a basic database (CRM) into which the results can be recorded.  The need to actively manage personnel and the processes required are often overlooked.

Here are some of the required elements:

  • A systematic methodology for recruiting, hiring and training qualified people.
  • The more complex your subject matter and value proposition, the more difficult it will be to find the “right” people.  
    • Some considerations:
      • University Graduates?
      • Significant Business experience?
      • Familiarity with selling to and navigating complex (and large) corporations?
  • Complex products and services cannot be handled in a dialing for dollars mode using a script.  This means you need smart people who can engage in a consultative dialog, think and probe, listen and “peel away at the onion.”
  • Personnel management is an ongoing process because there will inevitably be turnover.  Meaning more effort recruiting, hiring and training (with lost opportunity cost during the ramp up period).  And that’s true even if a career path is established, because you’ll need to replace them when and if a promotion occurs.  These substantial indirect costs are often not considered when a company considers going down the in house path.
  • Making sure that your brand is being represented professionally
  • Rigorous quality assurance
  • Lead distribution and management
  • Record Management
  • Need to ensure that the notes related to the progress of each opportunity are sufficiently detailed to enable someone else to take over the record should the current business developer be replaced.  
  • Maintain focus:  Often the Business Development team, once in place, often gets sidetracked with other duties (administration, account management, customer service etc.).  Allowing this to occur dilutes the effectiveness of the entire effort as productivity drops dramatically.

So there is far more management time needed than is typically accommodated for.  And on top of having to provide systems and dedicated management resources, you’ll need to provide efficient and quiet workspaces and phone systems that will support phone-intensive activity.  Those costs are also usually overlooked.

To further complicate matters, because dedicated people are likely to be doing the same thing day in and day out, all day long, they are significantly less productive later in the day than earlier.  The smarter and more sophisticated the people you hire, the greater the likelihood that boredom will soon set in.  This inevitably leads to shorter tenure and higher churn rates.  And then there’s vacation and sick leave with the lost opportunity costs associated with those periods as well.  

At ETI we expect our productivity to be at least 100% more productive than that of a dedicated in house effort (deploying similar resources). Fact is on average we’re about about 200% more productive.

So, while on the surface it seems that doing it yourself may be better and cheaper it rarely works out that way.  Once you take all the direct + indirect costs into account - and measure this against the actual outcomes - insourcing is usually substantially higher than outsourcing.  And far less effective!


Client Quote:

"Over the years I’ve analyzed what it would take to duplicate what they provided for us with internal resources and we always came up short on our analysis. It was always more economical to leverage a relationship with ETI."



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