Background

Full 'sales outsourcing' is observed where companies have an external third party sales

Sales

A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....

 force. It is differentiated from value added reselling

Value-added reseller

A value-added reseller is a company that adds features or services to an existing product, then resells it as an integrated product or complete "turn-key" solution...

 or distribution in that the business model

Business model

A business model describes the rationale of how an organization creates, delivers, and captures value...

 can be based on shared risk, although there are models where the outsourcer is paid for all of their activity - just as with a hired direct sales force, but the outsourcer provides rapidity, flexibility and experience.
Other names for sales outsourcing include 'indirect sales' and 'channel sales'.

Full sales outsourcing is different from telemarketing

Telemarketing

Telemarketing is a method of direct marketing in which a salesperson solicits prospective customers to buy products or services, either over the phone or through a subsequent face to face or Web conferencing appointment scheduled during the call.Telemarketing can also include recorded sales pitches...

 in that it requires direct recruitment of sales personnel with specific backgrounds for each sales campaign. Usually the sales executives will be part of a team that may include telemarketing, marketing

Marketing

Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...

, tools systems and methodologies as well as sales management

Sales management

Sales management is a business discipline which is focused on the practical application of sales techniques and the management of a firm's sales operations. It is an important business function as net sales through the sale of products and servicess and resulting profit drive most commercial...

.

Sales outsourcing

Outsourcing

Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...

 firms provide accountability

Accountability

Accountability is a concept in ethics and governance with several meanings. It is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving...

 regarding all sales results and activities while representing the brand of the client. For the end-customer, it usually appears as if the sales team sold the product themselves rather than the sales outsourcing firm. The outsourcing firm is, in essence, an extension of the client but is responsible for all operations associated with direct sales activities, often receiving sales engineering and initial product/service training

Training

The term training refers to the acquisition of knowledge, skills, and competencies as a result of the teaching of vocational or practical skills and knowledge that relate to specific useful competencies. It forms the core of apprenticeships and provides the backbone of content at institutes of...

 support from the client.

Purpose of indirect sales

The sole purpose of a contract sales organization

Contract sales organization

A Contract Sales Organization is a firm or company that assists companies in the sales and marketing of their products and/or services. The term CSO is especially prevalent in the life sciences, medical device, and medical product launch sectors...

 is to provide sales resource to its clients, without taking title to their products. Sales outsourcing providers include manufacturers' representatives, contract sales organizations, sales agents or sales outsourcing consultants. One way of organising the sales effort, especially when product delivery is erratic, is to replace or supplement internal resources with functionality and expertise brought in from contract sales organisations.

Sales outsourcing is quite different from large-scale service outsourcing, which has its advantages but also requires pro-active contract and relationship management. In addition to full sales outsourcing, many partial models are observed, particularly in large firms.

Typical Activities Which are Outsourced

A variety of sales activities may be outsourced such as:

• outsourcing part of the sales process, e.g. lead qualification or lead nurturing
• outsourcing management of particular customer
  Customer
  A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
  
   segments, e.g. niche segments, geographies or sectors that are difficult to reach or are culturally very different
• outsourcing of sales of particular product or service lines (e.g. parts, maintenance), or product-related activities such as product launches.

Any of the following may also be considered as partial sales outsourcing or sales out-tasking:

• Integrating contractors
  Independent contractor
  An independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when...
  
   into in-house sales teams for coverage of long-term absences such as maternity leave, or general vacancy management
• Syndicated sales – where the contracted salesperson presents complementary products from different companies on a single call to a customer

Advantages of Outsourcing

Companies who outsource sales may have a variety of imperatives for doing so. The advantages of lower selling costs feature on the website of the Manufacturers' Representatives Educational Research Foundation (www.mrerf.org) and has been observed by author

Author

An author is broadly defined as "the person who originates or gives existence to anything" and that authorship determines responsibility for what is created. Narrowly defined, an author is the originator of any written work.-Legal significance:...

s, researcher

Researcher

A researcher is somebody who performs research, the search for knowledge or in general any systematic investigation to establish facts. Researchers can work in academic, industrial, government, or private institutions.-Examples of research institutions:...

s and consultant

Consultant

A consultant is a professional who provides professional or expert advice in a particular area such as management, accountancy, the environment, entertainment, technology, law , human resources, marketing, emergency management, food production, medicine, finance, life management, economics, public...

s.

Sales outsourcing is expected to be cheaper than the fully loaded cost of employing salespeople, but calculating the cost comparison over time is far from straightforward. Nevertheless, replacing fixed costs with variable costs is attractive to budget-holders. However, unlike many forms of outsourcing the advantages of sales outsourcing does not often come from saving costs but rather increasing revenue

Revenue

In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....

 or providing speed of response or flexibility.

The business case

Business case

A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation. The logic of the business case is that, whenever resources such as money or...

 for sales outsourcing should also include consideration of the cost of controlling the contract. Difficulty in measuring the link between sales activity and sales performance leads to a preference for employed salespeople. However, the issues internally are often the same and the internal hire has many other corporate "distractions" that do not occur with external resources.

Companies may also choose sales outsourcing as a means of accessing the best sales skills. Although the pejorative

Pejorative

Pejoratives , including name slurs, are words or grammatical forms that connote negativity and express contempt or distaste. A term can be regarded as pejorative in some social groups but not in others, e.g., hacker is a term used for computer criminals as well as quick and clever computer experts...

 term “rent-a-rep” is still used, there is some evidence that contractors are perceived as good performers against qualitative as well as quantitative performance criteria. Even so, the reputational risk of third parties handling customer relationships has been observed as a factor restricting sales outsourcing. One could argue that an employee is often using a company to gain 2–3 years salary and experience whereas a sales outsourcing firm would usually be looking at a long term contract even though the staff may change during that time. So the aims of an outsourcer can be closely aligned with the aims and objectives of the contracting company.

A recent study has highlighted flexibility as an important driver for outsourcing sales. Uncertain business environments accentuate the need to turn sales resource on and off quickly. Industries and companies undergoing rapid change may need to avoid hiring and firing costs and risks. Contract sales organizations can absorb employment risk, enabling their clients to respond to short-term opportunities or competitor activity. However, an outsourcer may build in more of a premium to the rate or commission if excessive flexibility is required on a contract.

Contract sales organizations are growing in volume and influence, able to provide both tactical activity and long-term strategic support to their clients.

Speed of response is seen as a key reason to use an outsourcer. if a company was looking to enter a market it may take several months to recruit the local manager which then takes several months to find and office and build a team. With an outsourcer, once selected often a full working team can be operational within a matter of days or weeks.

Indirect Sales Growth Rate

The experience of many organizations over the past several years demonstrates that indirect channels can be critical to expanding market coverage. This has been particularly true in the electronics

Electronics

Electronics is the branch of science, engineering and technology that deals with electrical circuits involving active electrical components such as vacuum tubes, transistors, diodes and integrated circuits, and associated passive interconnection technologies...

, communications and high tech

High tech

High tech is technology that is at the cutting edge: the most advanced technology currently available. It is often used in reference to micro-electronics, rather than other technologies. The adjective form is hyphenated: high-tech or high-technology...

 sectors. For example, the indirect channel now accounts for 66 percent of overall technology sales, up from 53 percent in 1997.

Examples of Indirect Sales Companies

Some examples of communications companies who employ indirect sales forces to their intersal sales efforts include: AboveNet

AboveNet

AboveNet, Inc. , provides high bandwidth connectivity primarily for large corporate enterprises and communications carriers. AboveNet operates private metro area and long haul optical networks, and offers services including high bandwidth metro access to WDM, Metro Ethernet, VPN and IP networks,...

, AT&T

AT&T

AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...

, Comcast

Comcast

Comcast Corporation is the largest cable operator, home Internet service provider, and fourth largest home telephone service provider in the United States, providing cable television, broadband Internet, and telephone service to both residential and commercial customers in 39 states and the...

, Earthlink Business

EarthLink

EarthLink , is an Internet service provider headquartered in Atlanta, Georgia, USA. It claims 1.94 million subscribers.- Business :EarthLink provides a variety of Internet connection types, including dial-up, DSL, satellite, and cable. Both dial-up and high speed Internet access are available...

, Integra Telecom

Integra Telecom

Integra Telecom is a privately owned, facilities-based, integrated telecommunications carrier and communications equipment provider headquartered in Portland, Oregon, United States. Founded in 1996, the company is one of the largest competitive local exchange carriers in the United States and...

, Level 3 Communications

Level 3 Communications

Level 3 Communications is a telecommunications and Internet service provider headquartered in Broomfield, Colorado.It operates a Tier 1 network. The company provides core transport, IP, voice, video and content delivery for most of the medium to large Internet carriers in North America and Europe...

, PAETEC, Time Warner Cable

Time Warner Cable

Time Warner Cable is an American cable television company that operates in 28 states and has 31 operating divisions...

, tw telecom, XO Communications

XO Communications

XO Communications is a telecommunications company owned by XO Holdings, Inc...

, and Windstream. Some top sales agencies who sell voice and data services for these carriers include Telarus

Telarus

Telarus, Inc. is a national sales agency that holds contracts with many commercial telecommunication carriers. Telarus consolidates the sales volume of hundreds of independent sales agents. As a master agent Telarus functions as the top layer in the 2-tier distribution model that is prevelent in...

, based in Salt Lake City, Utah

Salt Lake City, Utah

Salt Lake City is the capital and the most populous city of the U.S. state of Utah. The name of the city is often shortened to Salt Lake or SLC. With a population of 186,440 as of the 2010 Census, the city lies in the Salt Lake City metropolitan area, which has a total population of 1,124,197...

, Intelisys, based in Petaluma, California

Petaluma, California

Petaluma is a city in Sonoma County, California, in the United States. In the 2010 Census the population was 57,941.Located in Petaluma is the Rancho Petaluma Adobe, a National Historic Landmark. It was built beginning in 1836 by General Mariano Guadalupe Vallejo, then Commandant of the San...

, and Telecom Brokerage Inc (TBI), based in Chicago.