Outsourcing has been utilized by many companies for years dating back to the 1970s. However, it wasn’t formally identified as a business strategy until 1989 (Mullin, 1996). In the earlier years of offshoring, cost or headcount reduction were the most common reasons to outsource. In today’s modern business environment, the drivers are often more strategic and focus on carrying out core value-adding activities in-house where an organization can best utilize its own core competencies while saving costs.
Outsourcing has made a big impact on globalization, affording a lot of businesses to be more competitive in the global market while gaining access to world-class capabilities. Is your business considering outsourcing for these reasons?
First thing you need to know, the benefits of outsourcing are more than just cost savings. Yes, many businesses opt to outsource mainly to save money which they can use for more business-impacting activities, however, it also provides you with many other outsourcing advantages that can help scale your business—from a high level of efficiency to increased competitive advantage. Let’s discuss them further in this article.
Outsourcing as a Business Strategy
Outsourcing is recognized as a “smart business strategy” that aims to increase efficiency and reduce costs. To business owners who want to succeed, this is music to their ears. From information technology to accounting and marketing to human resources, business functions of SMEs are being outsourced more and more to the top outsourcing destinations such as India and the Philippines.
As with any strategy, the more benefits you get from it the better, and with outsourcing, you obviously get a lot. Outsourcing is so beneficial that some experts believe you could even run an entire company without ever hiring a single in-house employee.
5 Positive Effects of Outsourcing
Here are some of the most common impacts of outsourcing that can help scale your business.
1. Save Up to 70% on Operational Costs
Access to cheaper labor is probably the most well-known reason why businesses consider outsourcing. Workers in developing countries are paid far less than workers in established and flourishing countries due to the lower cost of living. This allows your business to get the work done for a fraction of the price. Not to mention relieving you of paying expensive benefits since the outsourcing service provider takes on this responsibility.
2. Get a Better Productivity Rate
Outsourcing can help improve the productivity of business operations by attracting highly-skilled and talented workers who are open to working on various shifts. The work output won’t dip because the outsourced workers are typically more focused and dedicated to not just meeting but even exceeding expectations, thereby contributing to the bottom line of your company.
3. Allows You to Focus on Core Business Functions
As your business grows, the quality of core activities may suffer as a result of an increased workload in time-consuming tasks. Outsourcing some of your business functions would free your time and energy and enable you to focus on building your brand, invest in research and development, and create new ways of providing higher value-added services.
4. Provides You with Access to Advanced Technology
If you have a small business, chances are you can’t afford to provide all your employees with the latest technology. Outsourcing helps you solve this because service providers can afford the latest technology since it’s part of their core business. More importantly, having the latest in technology to use helps your business to perform processes at an optimum rate, and thus be profitable.
5. You Have Flexibility in Staffing
If your business has seasonal or cyclical demands, outsourcing allows you to bring in additional resources or top talent when you need them and release them when you’re done. Put simply, you get to fulfill your current needs but without the financial commitment of continuous employment. Also, the outsourcing company can manage the hiring and training process for you, eliminating your worries and giving you more time to concentrate on more important matters.
No doubt, outsourcing is a phenomenal business strategy that when done right can help companies move closer to reaching their goals. What’s important is to evaluate which business function to outsource and choose the right outsourcing partner, and you’ll experience all the positive outsourcing effects on a business.
Interested in how outsourcing can help your business? Contact us now for a free consultation.