Outsourcing And Why It Is Important

Greetings!

Not getting outcome as per your company’s potential? Or want to scale up your business?

Maybe its time to consider outsourcing as an option to speed up things. Companies use outsourcing to cut labour costs and business expenses, but also to enable them to focus on the core aspects of the business. Before going into the thought of outsourcing for your company let us understand what it is.

What is outsourcing?

Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company’s own employees and staff. 

It was first recognised as a business strategy in 1989. As it has many benefits like cutting the manufacturing cost, it has its downsides too. Moreover, it was opposed in many countries justifying that it has caused loss of domestic jobs, especially in manufacturing sector. However, supporters say that it helps businesses to allocate their resources where it is most effective and it also maintains the nature of free market economies.

How outsourcing works

It is important to focus on business partnership in order to effectively outsource the responsibilities. Outsourcing is about managing, maintaining and securing a trusted relationship. It is more like partnership than just the purchase of goods and services.

It is important to frame the contract carefully and ensure that the involving partied fulfil their obligations.

Types of outsourcing

There are several ways to outsource a business process.

Broadly there are a few different types based on the distance between the two members of the relationship. These types are:

  • Onshoring– Relocating work or services to a lower-cost locations in the company’s own country.
  • Offshoring– Relocating work or services to third-party providers overseas.
  • Nearshoring– Relocating work or services to people in nearby, often bordering regions and countries.

Benefits:

  • Get the highly skilled expertise: Outsourcing helps to get a wider pool of talented and skilled personals that you would rather have. You have made a company for a specific task with people having expertise in that specific field. If you give repetitive tasks will lead to moderate results. By outsourcing, employees can focus on their main job
  • Reduces time and cost: Outsourcing a job to an expert can save both time and money and the outcome will be of high quality. For example, would you prefer to hire a full-time CFO for your small business or a CFO level person to visit a few times a month to provide financial analysis?
  • Businesses can also avoid expenses associated with overhead, equipment, and technology. For example,  a law firm might store and back up its files using a cloud-computing service provider, thus giving it access to digital technology without investing large amounts of money to actually own the technology.

Challenges and Drawbacks:

  • You must adequately manage contracts when involved in outsourcing.
  • Companies could lose control over aspects of the outsourced tasks or services. For example, a company could lose control over the quality of customer service provided when it outsources its call center function and it might be more difficult to correct the outsourced provider than correcting an in-house team.
  • Companies that outsource could also face security risks, as they exchange with their third-party providers the company’s proprietary information or sensitive data that could be misused, mishandled or inadvertently exposed by the outsource provider.
  • It might be difficult for employees of your company to communicate with the third-party provider due to many reasons like time zones if they are from different country.

When to outsource

Small businesses involve lots of variety of small tasks like phone calls, emailing clients, maintaining social media handles, web development, content and design work, etc. And if these tasks take up most of your precious time and resources, it would be difficult to focus on the core theme of your business. Moreover , not every employee of your company may be knowing these tasks. Learning and then doing such tasks will take more time and outcome may not be as efficient as that done by an expert.So it is suggested to outsource complex and time consuming tasks to experts rather than trying to manage all by yourself.

One of the major issue in new businesses is lack of personal. If the employee strength is less to work with.

If your company is rapidly expanding, then it would be tedious to hire and train people fast enough to keep up. You can skip these formalities by breaking down the project into smaller segments and outsource each part to qualified freelancers.

Lastly, when you need a specialised work to be done which needs to happen once or twice outsourcing is better option. For example, you would not like to hire a designer to design just a logo for your company. You don’t need your taxes to be done everyday. It is advisable to hire an expert for such tasks. You can get advantage of their knowledge and save money at the same time.

Do not outsource something just because you don’t want to do it. Small companies need to identify their core competencies and focus on their research and development. Outsourcing the core tasks will cease to offer any task which your customer couldn’t get elsewhere.

Making it work

  • Define your goals precisely before looking for an outsourcing provider. Clearly specify the task, budget for your project, deadlines and desired outcome.
  • Find the right contractor. Do your research on a provider before making a deal. And simply don’t fall for the low price offers. Ensure the quality of work provided by them. You can ask for the portfolio of previous work or ask for recommendations.
  • Provide complete details of requirements to your providers. The more the details, the better the outcome will be.
  • Create a clear contract for smooth business relationship. This will protect both parties from legal problems and there will be less room for doubts and disagreement.

Outsourcing is good practice but it is important to understand how it works. Set clear goals and choose trustworthy partner. This would let you focus on your business effectively. Moreover, outsourcing helps all size of businesses to grow and creates opportunities for small businesses and freelancers.

Hope this helped you to understand the convolutions of outsourcing.

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