ARTICLE | April 07, 2023
Authored by RSM US LLP
Technology companies in the startup and rapid growth stages are often focused on research and development and generating sales leads. For this reason, other key back-office functions of an organization, such as finance and information technology, are frequently deprioritized and undervalued. However, outsourcing these functions can be a competitive advantage by providing companies with best-in-class people, processes and technology solutions that ultimately allow them to scale up faster and more effectively.
Working with one external provider for a variety of services creates greater efficiency and continuity, and helps tech companies more easily avoid common pain points during growth. Those include challenges with scaling manual processes, a lack of standardization across programs and processes, managing IT, and issues related to the lead-to-cash cycle.
Outsourcing plays an important role for tech companies, especially in the wake of layoffs that hit the sector in 2022 and 2023. Even when layoffs are somewhat concentrated among large, publicly traded companies, the workforce implications affect the broader tech ecosystem. Outsourcing can help fast-growing businesses navigate hiring and talent optimization while also making spending more predictable, targeted and controlled.
Top 3 areas of importance
Tech businesses assessing which aspects of their business might make the most sense to outsource should focus on three crucial areas: IT, finance and security.
Here are some of the reasons why outsourcing is so beneficial across these functions specifically:
Starting around the 50-employee mark and above, companies tend to get overwhelmed by help desk tickets, IT requests from staff, the need to expand and maintain the IT environment to support the business, and the need to staff the IT department to cover all technology domains. Outsourcing IT is an enormous help in relieving related stressors and enabling more of the company’s IT engineers to focus on product development and other strategic business needs.
Managed IT services can provide 24/7/365 monitoring and management of a company’s IT environment. This includes endpoint management, end-user help desk support, new user setup and provisioning, application management, network and infrastructure management, cloud management, backup and recovery services, IT security awareness training services and strategic IT guidance. Businesses can also decide between outsourcing the entire IT function or outsourcing specific components—such as the end-user help desk, network and infrastructure, or managed applications—to complement in-house IT staff.
Outsourcing the finance and accounting functions is a critical solution for technology companies on a growth trajectory, especially considering the difficulty of recruiting and retaining high-quality finance and accounting professionals.
An external provider can handle basic accounting processes—such as accounts payable processing and employee expense reporting—and more complex accounting issues, including Accounting Standards Codification 606 revenue recognition, equity accounting, software development and initial public offering readiness. That flexibility is key; while outsourcing the entire finance function may make sense for one company, another might benefit more from outsourcing specific processes and augmenting existing staff, for instance.
Working with a trusted advisor also means more affordable access to technologies that the provider has partnerships with, such as Oracle NetSuite, Sage Intacct, and BlackLine, along with easier scaling of those technologies as the business grows.
External providers play an important role in improving a tech company’s operational IT security and cybersecurity through solutions such as 24/7/365 security operations centers, endpoint detection and response, security incident and event management, information protection, monitoring strategies and enterprise risk compliance.
Managed security services help companies mitigate a range of business and technology risks by assessing, triaging and escalating critical security events that could affect a company’s environment; performing vulnerability and attack surface scanning; conducting a forensic analysis on assets identified as compromised; and helping teams respond to and recover from confirmed incidents.
Security should be high on any organization’s priority list, and outsourcing that functions to an experienced partner allows for safer scaling.
Outsourcing back-office functions makes spending more manageable on several fronts; rather than having to build out entire teams, companies instead pay predictable monthly fees for IT support, hardware and software costs, accounting services, and other functions. More predictable spending is a huge asset through any economic ebbs and flows, but especially ahead of or during economic downturns.
Knowing when to make a change
Tech companies focused on scaling their operations have a host of challenges to navigate, from product development and accessing capital to sales growth and tax considerations—all while hiring rapidly. Stages in which businesses are adding scores of new employees are often a big inflection point; companies should seek out an external provider for onboarding, offboarding, security, cyber insurance services and more.
It’s also important for leadership teams to continually assess how outsourcing serves them throughout the business life cycle. Companies will have different needs as they mature, and key areas for improvement will often shift. External partners can help with tax services, risk management, compliance work and more.
The importance of industry knowledge
Technology companies have plenty of options when determining whom to partner with when outsourcing aspects of their back office. Leadership teams should prioritize finding a provider that understands the unique needs and issues within the tech sector. That includes common stock valuation, the rise of subscription-based business models, labor market shifts, global privacy and security compliance, process automation and partner channel growth.
Having a partner with deep industry experience helps businesses avoid common pitfalls, plan for the future and manage growth sustainably.
This article was written by Elizabeth Hart and originally appeared on Apr 07, 2023.
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