Top 10 Reasons Why You Should Try Outsourcing

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Outsourcing is delegating certain tasks within a company to third-party agencies.

Outsourcing can help companies save on labor costs, access an innovative talent pool, and enhance innovation in product development. It can also be done locally or internationally.

In cases where the labor is sought from overseas nations, the process is referred to as offshoring.

“I’ve decided to take advantage of outsourcing. A couple will write my next novel of guys in Bangalore, India.”

Tom Robbins, Author

Outsourcing and offshoring serve the same goal, but each option has pros and cons. Nonetheless, here are the top 10 reasons why you should consider outsourcing or offshoring:

Outsourcing definition

Outsourcing is a common business strategy where specific services or job roles are contracted out to an external provider. In IT, outsourcing can range from the totality of IT operations to more accurately specified elements, such as software development, disaster recovery management, QA testing, and network maintenance.

Organizations often explore the advantages of onshore, nearshore, or offshore outsourcing to reduce expenditures. Typically, nearshoring and offshoring have been popular choices for budget-friendly business solutions. However, each type offers particular benefits depending on a company’s needs and goals.

Top 10 reasons to try outsourcing

Save on labor – outsourcing can allow corporations and businesses to access a talented workforce in overseas nations at significantly low labor costs. This can positively impact the company’s bottom line in the long run.
Focus on core competencies – outsourcing allows companies to get smaller yet essential tasks from third-party agencies. This frees time for them to focus on their core competencies leading to greater development of knowledge-based assets.
Access top talent worldwide – Outsourcing and offshoring may also help organizations tap into a global talent pool. This ensures access to important tacit knowledge, leading to innovation and business success. The global knowledge pool is very dynamic. Outsourcing promotes an effective way to access these dynamic capabilities in line with the needs of the business at that particular time.
Free resources for investment – the resources freed from outsourcing may be used to invest in other important areas of the business. This will, in the end, promote healthy growth and expansion of the company. The freed resources may also create a capital buffer that enhances the company’s stability and security for the future.
Outsourcing and offshoring – may also help companies tap into new markets away from their current base. Working with talented experts from different countries provides additional insights into overseas markets and possible opportunities. This knowledge can be used to promote new ventures that help the company expand and reach out to new markets.
Cost savings – although savings on labor costs are the most common when it comes to outsourcing, there are other savings too that can be realized through this process. Offshore workers with the right expertise can get things done faster and efficiently from different locations. This reduces the operational expenses needed to maintain a workforce support environment in the organization.
Infrastructure – Besides the cost savings, organizations can benefit from building a reliable and secure infrastructure for outsourcing activities. This can include a secure data center, a reliable communication link, and an effective management system. This infrastructure can help ensure the delivery of quality services without any interruptions.
Flexibility – Outsourcing allows organizations to adjust their workflow according to changing conditions in their markets or industries. It also enables them to access additional resources on an as-needed basis.
Knowledge Transfer – Outsourcing can help organizations access new technology, processes, and skills. This knowledge transfer is essential for organizations lacking the in-house expertise or resources to develop their solutions or services.
Process Management – Organizations should ensure that all outsourced activities are efficiently managed and monitored to meet their objectives. This includes setting up systems for communication, tracking progress, resolving disputes, and other aspects of the outsourcing process.

Outsourcing services

Business process outsourcing (BPO) is an all-encompassing term for delegating a business process, such as payroll. BPO can be categorized into two types: back-office BPO and front-office BPO. Under back-office BPO falls internal functions like billing or procurement; on the other hand, customer-related services like tech support or marketing come under front office bpo.

IT outsourcing is a specific arm of business process outsourcing and can be divided into two major areas: infrastructure and application. Regarding the former, IT infrastructure services range from service desk capabilities, data center management, network operations & security monitoring to comprehensive infrastructure oversight. Application-wise, this encompasses new app creation/development, legacy system upkeep & quality assurance testing, and package software setup & maintenance.

Nowadays, IT outsourcing isn’t limited to simply partnering with third-party providers. Companies can also outsource their SaaS (Software as a Service), Iaas (Infrastructure as a Service), and PaaS (Platforms as a service). Traditional outsourcers and global software vendors provide these cloud services, and niche companies or even industrial firms offer technological solutions.

Outsourcing pros and cons

When considering the benefits and risks of outsourcing, it is important to consider the specific circumstances associated with your situation. The business case for outsourcing in any given scenario can vary but may include the following:

3 Pros of outsourcing:

Cost savings: An outside provider can often handle tasks at a lower cost than an internal employee, particularly if the task is labor-intensive or requires specialized skills.
Improved focus: Outsourcing allows businesses to focus on their core competencies and activities most important to their success.
Access to specialized skills: A third-party provider can provide a business with access to needed skills or technology that would otherwise be unavailable.

3 Cons of outsourcing:

Loss of control: Outsourcing can lead to losing control over the process and quality of work as an outside party handles it.
Communication issues: Working with an outside provider can result in communication and cultural differences that create further challenges, such as delays or misunderstandings.
Cost savings are not guaranteed: Businesses must do their due diligence to ensure that the cost savings from outsourcing will be realized. If not managed properly, outsourcing could become more costly than expected. Also, hidden costs such as training, communication, and administration can add to the overall cost of outsourcing. Sometimes, it may be more cost-effective for businesses to keep operations in-house.

What’s your reason for outsourcing?

Businesses around the world will outsource for different reasons.

However, one thing is clear. There is so much to gain from this. Outsourcing is now an important part of firm strategy, and looking at the benefits above, it’s not hard to see why.

Need help with outsourcing?

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