Outsourcing has benefited a lot of companies. This is why businesses that once only relied on insourcing are slowly adopting this business model.
If you’re new to business, you’re probably wondering why companies choose to outsource work. This article will answer this question and discuss when outsourcing will bring benefits to your business.
Why Do Companies Choose to Outsource Work?
1. Access to More Talent
Hiring talent can be a tedious process. You have to look at their resumes one by one to determine the best hire. Unfortunately, not every company has the time and resources to cherry-pick the best talents.
One of the reasons why companies outsource is to access a better talent pool globally. Getting talents from outsourcing firms allows you to hire people with skills that may not be available locally. They can offer fresh techniques that you can integrate into the business, thus resulting in growth.
In addition, outsourced talents often have years of experience in their respective industries. Therefore, they don’t need extensive training and can perform tasks right after briefing them.
Find out some business areas where outsourced staff can help you in this Forbes article.
2. Saves Operational & Labor Costs
Some of the significant costs of every business are labor and equipment. If you hire an in-house staff, you must provide them with office space and equipment. You’ll also need to spend money on operations and labor.
Meanwhile, outsourced employees already have their equipment, so you don’t need to provide them with one. Since they work at home or in a space provided by their outsourcing agency, operational costs like electricity and internet are reduced.
Furthermore, since the Fair Labor and Standards Act considers outsourced staff to be “business for themselves,” they are not entitled to employee benefits.
According to a study by the NAPEO, companies that outsource their HR function can achieve an annual saving of 27.2%.
3. Fast & Steady Growth
True enough, growth can be achieved by hiring in-house employees. However, not every business can financially support more people and provide them with their operational needs. This financial strain limits a company’s ability to grow.
Due to lacking financial means, some businesses require their existing employees to take on more work. But instead of growth, this causes employees to feel burdened and not accomplish things.
With outsourcing, you can achieve growth more affordably. You acquire knowledgeable people about your industry, while your in-house staff can focus on their specialties.
Find out how much companies can save by outsourcing in this article.
4. Greater Flexibility
It’s not every day that your business needs a lot of manpower. Most of the time, you only need more people during peak seasons. However, when you hire in-house staff, you can’t just let go of them when you no longer need their services.
That said, another reason why companies choose to outsource work is flexibility. You can outsource tasks during busy days and let go of your outsourced staff once the peak season is over.
Another flexibility of outsourcing is it allows you to switch to a new team when the first ones you hired did not meet your needs. It does not require long-term commitment, so you can manage your team’s size whenever needed.
5. Provides Fresh Perspectives
Does your business already feel stagnant? You might need fresh perspectives from a team of knowledgeable people. This is easily achievable through outsourcing.
Many people in the outsourcing industry are professionals who have built their names through skills. So, they can expose your business to fresh insights your in-house team might not have thought of yet.
You can also learn and adopt the skills your outsourced staff has. This can give your in-house team a new or easier way to work on things. That said, it isn’t just your business that outsourcing can benefit from, but also your employees.
6. Better Risk Management
There are many types of risk mitigation involved in outsourcing. For instance, by outsourcing to staff from other countries, your operations will continue even during natural disasters.
Outsourcing can also eliminate language barriers and timezone risks. Outsourcing customer service operations to countries where your brand is present allows you to support customers the way they need and in the language they understand.
Finally, many companies choose to outsource work to reduce operational risks. Letting your in-house team handle all the work may cause them to miss important details or make mistakes.
By outsourcing your operations, you reduce your employee’s workload, allowing them to focus more on what they have at hand.
7. Access to New Tools
Your business evolves, as do the tools you use for your operations. However, when your in-house team is already comfortable with the technology they’re currently using, integrating a new tool can lead to confusion and lower output. This is because they will need time to get used to the new tool.
When you choose to outsource, you can look for people who already know the tool you want them to use. This way, you can save time by training them how to use the software. It also lets your in-house staff get familiar with new technology without letting go of what they already use.
Outsourcing also lets you access tools that are not available locally.
8. Compliance With Requirements
Some industries, such as financial and healthcare, need a higher level of requirement compliance from their staff. However, such security requirements can add costs to staff maintenance, as you need to train them to handle private data.
That said, many companies’ reason for outsourcing is security compliance without the financial burden of training them.
Outsourcing agencies train their staff before they work for you so they know about security requirements. With this, you can avoid facing lawsuits brought by noncompliance.
9. Focus on More Important Business Functions
Every business handles many mundane tasks. While these tasks are easy to do, they can also be time-consuming. Outsourcing them can make your in-house team more productive, as they no longer need to work on repetitive tasks.
Instead, your in-house team can focus on more critical projects, letting them finish them quickly. Dividing work this way helps your business become more productive and focus on things that can help you reach your goals.
It’s not only the mundane tasks that outsourced staff can handle. If you have a core task that needs to be done by a specialist, you can outsource it to someone who has mastered the skills required for the job.
10. Better Customer Satisfaction
Outsourcing can improve customer satisfaction if your business offers products or services to customers abroad. Your outsourced team can provide your clients with customer support exactly when needed.
On the contrary, letting your in-house staff handle customer support for clients abroad can prevent timely assistance and lead to disappointment.
With better customer support and satisfaction comes customer retention and loyalty. They may even recommend you to their peers, thus increasing your sales and profit.
LinkedIn has an article discussing how outsourcing can result in customer satisfaction.
11. Overseas Expansion
Another reason why companies outsource is because it allows them to tap into international markets without the need for a hefty investment associated with starting a branch abroad.
Outsourcing helps companies test whether their product or service is viable in certain countries before expanding fully. This way, they can avoid the costly mistake of establishing their presence in a market that will not embrace their offerings.
12. Round the Clock Operations
If you seek to increase your business hours, outsourcing can help you do just that. If you outsource from a country with a different timezone, your outsourced staff can handle operations while your in-house staff is off shift.
This business model allows your business to accomplish more without overworking people. You can meet tight deadlines, accelerate business processes, and achieve your business goals while everyone maintains a healthy work-life balance. This maximizes production without heavily increasing labor costs.
13. You Get Competitive Edge
One of the many challenges faced by startups is industry competition. Most of the time, people choose a more established business over a new one. To gain a competitive edge, you must hire experts who can offer specialized knowledge, especially in areas with which your in-house staff are unfamiliar.
Employing such expertise in your business can result in high-quality output and efficiency. It can also help your in-house employees learn new techniques, allowing them to compete with the ever-growing market.
This LinkedIn article can guide you if you want to gain a competitive advantage through outsourcing.
14. Adaptability to Industry Demands
Market changes are inevitable, so you must expect to face new industry trends now and then. If you can’t adapt to these changes, your business’s growth may stagnate.
While keeping up with the rapid technological changes can be challenging, outsourcing can help you discover new industry trends. When outsourcing, you can hire an expert in emerging technologies, allowing your business and in-house staff to adapt to changes quickly.
What Are the Risks Involved in Outsourcing?
Outsourcing can undoubtedly bring your business to new heights. However, like every business model, the benefits of outsourcing come with risks. Knowing these risks is vital as it lets you understand how to manage them.
Here are the risks associated with outsourcing:
- Lack of Control.
When you outsource tasks, you retain little to no control over how it’s done. This affects the quality of those tasks, as you cannot manage your outsourced staff like your in-house employees. For this reason, it’s essential to outsource experts with proven experience in your industry. - Privacy Concern.
Outsourcing exposes your business to people not part of your in-house team. While it’s uncommon, your outsourced staff may steal your data or trade secrets. So, to ensure security, choose a reputed vendor like PortfoLink when choosing an outsourcing provider. - Your Lack of Experience.
If it’s your first time to work with a remote team, managing them can be complicated. The need for constant check-ins, communication, and feedback may feel overwhelming and can result in mismanagement. You can use this guide to prevent mismanaging your remote team and ensure success in outsourcing.
Check out the pros and cons of outsourcing in this Forbes article.
Achieve Your Business Goals Through Outsourcing
If done correctly, outsourcing can bring many benefits to your business. This is one of the reasons why organizations choose to outsource services to third-party agencies. But before you can reap the benefits, you must first look for an outsourcing agency that is reputable and trustworthy.
Once you have a partner, ensure you work closely with them. This will ensure that all your requirements are met and the output quality remains high.
