Outsourcing: Definition

Outsourcing is a common business practice. Companies hire third-party contractors to perform business tasks or run operations. This typically happens when the company doesn’t have an in-house expert team to perform those tasks.

Instead of investing time and money in training the existing employees, companies prefer to save costs and time by hiring a third party to provide the required services. If you look closely, most businesses outsource work to get it done in less time and money.

Companies make smart decisions, and why wouldn’t they when they see better profits and optimal productivity? So, the question arises, what kind of processes can a business outsource? These include:

●      Staff Augmentation

●      Website design

●      Customer support

●      Facilities management

●      Content writing

●      Diagnostic services

●      Supply chain management

●      Legal documentation

●      And so much more!

Outsourcing: Common Examples

●      A digital marketing agency may hire freelance content writers to save costs and time on hiring and training in-house writers.

●      An IT agency may hire QA testing and customer support services for the time being to fill capacity rather than hiring people to reduce business operations and costs.

●      A law firm may subscribe to the services of a cloud service provider to save and backup documents in a secure place. This helps the firm save money on developing the said technology.

Outsourcing: Types to Consider

1.Onshore Outsourcing

I usually go for this type of outsourcing. As a business owner, you just have to hire a third party located within the same country or region as you. The best part about onshore outsourcing is knowing how skilled a worker in your area is.

There are no language or cultural barriers to look out for. And even though it would save you some cost, due to the same currency, this saved cost won’t match with what you can potentially save from nearshore or offshore outsourcing.

2.Offshore Outsourcing

Offshore outsourcing is the opposite of onshore outsourcing. A business must hire international (any part of the world) third-party contractors. This saves a lot of expenses while acquiring skilled professionals for work. The only downsides are the possible language, cultural, and time zone barriers.

3.Nearshore Outsourcing

As the name indicates, nearshore outsourcing lets businesses hire third-party service providers in an adjacent country. Generally, this country will have the same language, culture, and skills the business would be looking for. It also allows hassle-free onsite visits and clear communication.

4.Onsite Outsourcing

This outsourcing type is the best for IT companies that require onsite personnel to carry out the tasks or business processes. For example, hiring an onsite third-party hardware maintenance services provider.

Benefits Of Outsourcing For Your Business

The most commonly heard benefits of outsourcing include:

1.Saving Costs - Reducing Expenses

A business’s internal operations expansion is not always cost-effective. This may be due to capacity or physical location issues and the equipment required. For example, your business needs more office space due to new hires or newly formed departments.

Instead of buying a bigger space (which would be very expensive), it will be better to outsource manageable operations like data entry, customer support, or legal documentation. This may increase efficiency and reduce costs than simply buying or renting a new office space.

2.Enhanced Efficiency

Not every company can afford to hire the in-house best talent. The best talent always comes with a hefty price tag. Due to the size of your company, you may not be able to complete the back-office tasks within an affordable budget. With back-office tasks handed to a third-party contractor, your employees will have more time to focus on important business information, increasing overall efficiency.

3.More Focus On Core Competencies & Strategy

Your back-office tasks are bound to grow with business expansion and rapid growth. This may affect the way your company handles the business. For example, your human resource and finance departments may spend more hours on hiring and bookkeeping than on the core competencies or functions that made the business successful.

In short, your business can’t lose sight of what’s important. Hiring third-party contractors for such tasks. For example, your IT agency may receive a huge contract that will quickly increase the volume of purchasing hardware. Instead of doing it in-house, outsourcing it will allow your employees to focus on the contract.

4.Better Staffing Flexibility

If your business has seasonable operational demands, outsourcing will do wonders in saving costs on hiring additional resources. You can always employ third-party services for the short term and let them go when the high-demand period is over.

For example, if you don’t have a well-established accounting department, you can outsource these functions during tax or auditing seasons. Outsourcing will provide an additional and reliable workforce for a fixed time and within your budget.

5.Developing & Enhancing Internal Staff

A large, high-end contract means your company may lack the required technical skills. Instead of hiring new people, opting for onsite outsourcing is the best option. The outsourced team will work within your company premises.

This will benefit your employees as they work beside them and acquire new skills. For example, your IT agency may need to upgrade the hardware system. However, your company lacks the expertise to design these new upgraded systems. Outsourcing the project and having those engineers work in-house will improve your employees' skills.

Conclusion

Outsourcing may sound sketchy to a few people, but its advantages are unmatchable. It is best to remain vigilant while outsourcing your business operations or tasks and outsource only those you think your company can’t handle (out of budget or short staffed).

The number of companies outsourcing their tasks or processes is increasing to become efficient and flexible while reducing costs and saving time. So, is outsourcing best for your company? What do you think?