One way for a company to scale is by reducing business costs. Big companies such as IBM reduce costs by outsourcing key business process. But, outsourcing is no longer a reserve for huge companies. Technology has made the world a small place, enabling small to medium-sized companies an opportunity to outsource.
What is outsourcing?
The conventional way of performing business functions is hiring in-house employees . This method involves having employees on a regular payroll. Outsourcing, on the other hand, is the practice of contracting business processes to external providers. When you outsource you pay for the service when you need it. You do not need to have the contractor on a regular payroll neither do you need to rent or buy a physical space for the contractor to work from.
Most businesses outsource services such as payroll, internet marketing, customer support, and accounting. The demand for these services is growing and with it new and innovative outsourcing services.
The advantages of outsourcing key business processes
Businesses have different reasons for outsourcing work. Unfortunately, some people defame the practice by claiming that companies are shipping jobs overseas and saying that businesses do it to evade the high tax rates. The truth is that outsourcing has many great benefits other than tax breaks .
- Reduce business costs
Compared to in-house hiring and training, outsourcing is cheaper. Moreover, you need not invest in infrastructure to accommodate the employees. Companies enjoy more reduced costs by outsourcing services to developing countries since they have cheap labor.
Furthermore, outsourcing allows variable-cost models such as fee-for-service plans. Such cost models are cheaper compared to the fixed-cost model involved in retaining in-house employees
- Focus on core activities
Every business has core functions and non-core functions. Non-core functions are supplementary to the core functions. However, they eat up time that could be better spent on core functions. For instance, preparing the payroll is a non-core function. By outsourcing such a service, your accounting department can focus on core functions such as establishing business differentiators.
- Access skilled expertise
Outsourcing providers are specialist in whatever services they offer. Your marketing department may not be skilled enough to create compelling and optimized blog posts for your website. You could be better off outsourcing the work to a company that specializes in content development.
Outsourcing is also a great way to hire top talent. You might be willing to hire the best accountant but lack the funds to have them on your regular payroll. By outsourcing, you only have to pay for the service when you need it.
- Time zone advantage
Companies outsource work to foreign countries, which are most probably in a different time zone. As such, your business will continue running even after you are closed for the day. The advantage of the time difference is having business operations running round-the-clock. What better way to get ahead of your competition.
- Access state-of-the-art technology
As mentioned earlier, outsourcing allows you access to skilled personnel. It also allows you to access cutting-edge technology without actually investing in it. For example, you might not be able to invest in the latest data entry software. However, a data entry outsourcing company will have the software. They specialize in the services they offer, so they make the required investments.
- Staffing flexibility
Uncertainty in demand is common in business. During times of when business is slow, you do not need a lot of staff and when demand is high you need a lot of workers. Outsourcing allows you to upscale and downscale your staff according to your business needs.
Additionally, outsourcing to offshore locations offering cheap labor allows your business to operate in the offseason and during holiday months.
- Faster service delivery
Outsourcing service providers are experienced and skilled in their field. They produce quality work in a short period. These providers are paid for work done not for showing up to work. Quality services and fast turnaround times improve productivity and boost customer satisfaction.
Factors to consider before outsourcing work
Outsourcing is not always the best solution. You should decide whether to outsource after answering the following questions:
Do you have the requisite resources and experience?
Does your business have the resources required to accomplish a certain task? It will be cheaper to outsource than to rent or buy the resources required for most business processes. Another important consideration is the knowledge and experience of your in-house employees. Would you rather professionals handle the task or your inexperienced employees.
Do you have time to do the work?
If your employees are flooded with work, you are not doing your business any good by adding more work to the pile. This is also a question of whether your time would be better spent doing other tasks.
Do you have to do it?
If your in-house employees do not have to do the work, then outsource it. Why task your employees with bookkeeping, invoicing or data entry when it can be done by another person?
Types of business process you should consider outsourcing
- Accounting: Accounting and bookkeeping are non-core business processes that can keep you awake for hours without proper planning. Keeping such tasks in-house is expensive and wastes time that could be spent on other important work.
- Web management: Your website is an important aspect of sales and marketing. It needs maintenance and regular updates of software and hardware to ensure the safety of your data. Web management also requires to be handled by experienced and skilled professionals. Having such professionals in-house could be expensive as they are not needed on a daily basis.
- Internet marketing: This type of marketing involves social media marketing, search engine marketing, and content development. These tasks are important but are labor intensive and require specialized knowledge.
Outsourcing allows you access to the right skills, resources, and manpower whenever you need it. Ultimately, it helps a company scale by reducing the business costs involved in in-house staffing. Fortunately, all types of business can reap the benefits of outsourcing. You just have to find the right outsourcing partner.