Outsourcing is a concept people get fired up about. Some people love it; others hate it. It seems as though nothing divides a room full of business professionals faster than the idea of sending some services out of house.
Outsourcing is the practice of using outside firms to handle work normally performed within a company and is a familiar concept to many entrepreneurs. Small companies routinely outsource their payroll processing, accounting, distribution, and many other important functions — often because they have no other choice. Many large companies turn to outsourcing to cut their costs. In response, entire industries have evolved to serve companies’ outsourcing needs. But not many businesses thoroughly understand the benefits of outsourcing.
Although some people will argue against it until they’re blue in the face, outsourcing is incredibly important for virtually every business today.
It’s true that outsourcing can save money, but that’s not the only reason to do it. Wise outsourcing can provide a number of long-term benefits. Outsourcing has become a popular tool for diverse businesses around the world because of the following benefits:-
Cost-cutting may not be the only reason to outsource, but it’s certainly a major factor. Many businesses embrace outsourcing as a way to realize cost savings or better cost control over the outsourced function. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business. The most important benefit is that outsourcing of work allows one to get the work done at a very low cost and in a much more efficient way. There is a vast difference in the wage patterns of the western developed countries and the developing companies. The kind of work which is done in the west for a very high price can be obtained at a much cheaper rate in the developing countries and the difference varies to up to 60%. Offshore outsourcing allows the organization to obtain high quality services at a low operational cost.
Companies that do everything themselves have much higher research, development, sales & marketing, and distribution expenses, all of which must be passed on to customers. Outsourcing the business functions and working with an outside provider’s cost structure and economy of scale can give your firm an important competitive advantage.
Every business has limited resources, and every manager has limited time and attention. Outsourcing can free the entrepreneur from tedious and time-consuming tasks, such as payroll, so that he or she can concentrate on the marketing and sales activities that are most essential to the firm’s long-term growth and prosperity. Outsourcing can help your business to shift its focus from peripheral activities towards work that serves the customer, and it can help managers set their priorities more clearly
While growth is usually a good thing, a business can experience growing pains. A good outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them, and provide the support they need. And if a project requires major capital investments (such as building a series of distribution centers), the startup process can be even more difficult. Teaming up with a third-party provider is the best thing you can do.
Every business and business investment carries a certain amount of risk. Markets, competition, financial conditions, government regulations and technologies all change very quickly. Outsourcing the business functions to the right providers, assume and manage this risk for you and they generally are much better at deciding how to avoid risk in their areas of expertise.
ACCESS TO TECHNOLOGY
Some experts tout outsourcing of computer programming and other information technology functions as a way to gain access to new technology and outside expertise. Infrastructure cost is another major concern when it comes to in-house services. Companies that outsource HR might choose to do so because implementing a new payroll system is expensive. A firm that sends customer service out of house might be looking at the total cost of implementing the technology needed to run the most up-to-date contact center and provide customers with the best service possible. The third-party provider has already invested in the technology needed to deliver the services you seek—and reps are already trained to use it.