“Outsourcing” is a self-explanatory word. It means asking for help from an outside source when you are stuck on a project and your labor bails on you. What can you do? Outsourcing is the solution you need for these situations. Even in normal conditions, you might opt for outsourcing rather than hiring high-rated workers, which is both expensive and hectic. The beneficial nature of outsourcing lies in its cost-effectiveness and time-saving characteristics.
Read this article to learn more about outsourcing and its benefits for your business.
Understanding The Concept of Outsourcing
Outsourcing refers to contracting with a specialized and skilled company outside your organization that will work for your business. The third party will handle your business operations. You do not have to bear loss and risk alone when you have a partnership with someone or have a contractor company beside you; instead, outsourcing provides you with Shared risks and losses with the contractors.
The term “outsourcing employees” refers to workers from contracting companies, freelancers, and remote workers. Because they are not the company’s employees, they work on contract. Before going further, you might know two terms: “outsourcing company” and “outsourced company.” The company that requires outsourced employees is an outsourcing company, while the company that provides employees and services is an outsourced company.
The examples of outsourcing are as follows:
- Hiring an IT department from another country
- Hiring graphic designers and content writers from a digital firm
- Contracting with marketing agencies to promote your business.
- By contracting with a distributor, you can sell the product by name.
- Hospitals contract with pharmaceutical industries.
- Companies hiring accounting or tax agencies.
- And many more
Types of outsourcing
There are three main types of outsourcing based on the area from where you hire a company or employees.
- Nearshore outsourcing
Nearshore outsourcing is hiring and contracting service providers from a country within the same culture and location where the labor cost is low. For instance, a marketing agency in the USA partnered with a clothing brand in Costa Rica.
- Offshore outsourcing
Offshore outsourcing is the hiring and contracting service providers from a distant country that can be in another continent with a different time zone. For instance, A software house in the UK hires content writers from china.
- Onshore outsourcing
Onshore outsourcing is hiring and contracting service providers within your own country where your company is located. For instance, a tax agency in NYC hires tax preparers from New Jersey.
Top 12 Advantages That Outsourcing Provides
From 1989, outsourcing became an integral part of business strategies, and till now, business people have taken advantage of this concept. If outsourcing is used appropriately, a business can excel incredibly and exponentially. The following are some legit benefits of outsourcing work.
Economical and cost-effective
Recruiting a qualified person from a developing country with a low economy and currency rate will benefit you because outsourced employees will do your work for less, which is inexpensive for you. According to recent studies, 27 percent of companies use outsourcing to decrease labor costs and save revenue. Below are the two sub-advantages of outsourcing.
Cost control: By recruiting labor from a company with low labor costs and labor that fulfills your requirements, you can save considerable money, or it would otherwise be spent on payrolls.
Suitable for the economy of an outsourced country: A country serving its labor to a country with a high currency rate will increase its economy. To clarify, here is an example; A Pakistani company provides services to a US company and, in turn, gets paid in US dollars. It is beneficial for both countries. One is getting labor at a low price, and the other’s economy boosts.
A high-quality product or work
Of course, you contract with a company or hire someone who specializes in that department, but for web development, you recruit a qualified web developer from another country. As a result, you will get a high-quality product. This company may have more advanced technology and qualified staff than the outsourcing company.
Many methods exist that help outsourced companies increase product quality; for instance, they might get special training or provide highly qualified and experienced employees for work.
We already discussed that outsourcing is cost-effective and affordable for large businesses. But how it lowers the investment is still a question. Your query will be resolved after reading this section.
Outsourcing is inexpensive and revenue-saving because you do not need to hire staff, buy technology or establish a plan to make your product; instead, you contract with a company that provides these services, and your product is ready without much hassle.
Overhead cost affordability: it includes ongoing expenses on a business but is exclusive of the direct cost involved in manufacturing the product so outsourcing benefits in regard too.
Approach to the global hiring pool
Through outsourcing, you can approach global talent with affordable labor costs. For instance, if you want to hire someone from Malaysia and you are an employer in Canada, you can hire them by outsourcing. There are many ways to do so, i.e., you can use freelancing platforms and hire someone instantly or contact companies that provide employees for outsourcing purposes.
It benefits you by accessing the worldwide talent and a diverse workforce with different skills and capabilities.
Work continuation, regardless of time.
As you can hire employees from a global hiring pool, time is acceptable. You run a company in America and hire Pakistani employees, and your business runs 24/7. Because when it is night in America, outsourced employees work in Pakistan as it is daytime there.
Spare time to serve and prioritize
By outsourcing, you can Focus core facility of your business. It saves your in-house employees from doing more meaningful work. Moreover, you can save your internal resources like workspace, equipment, and electricity by outsourcing, which is how it becomes cost-effective for a business. You are free to prioritize your work without getting the stress of things the outsourced company handles.
Outsourcing divides the workload with an external helping agency, i.e., outsourced employees or a contracted company. It positively impacts in-house employees as they can do the work they are hired for.
Outsourcing and scalability go hand in hand because businesses grow to fulfill increased demands. In simple words, scalability in a business is the addition of resources, i.e., employees or contractors, with up-to-date technology that can meet the growing business demands.
You might be thinking about how scalability is a benefit of outsourcing. Scalability is more a quality of outsourcing or the cause of outsourcing because the upsurge in demand leads a company to recruit outsourced employees.
The best approach for small companies is outsourcing, as it improves the competency rate. For instance, for a small enterprise doing everything, this approach might put them in a difficult situation. Their production has a downfall instead of an elevation. To increase competency, they can try outsourcing and focus on core functions of the business, leaving other work to outsourced companies.
A person cannot solve problems alone; however, when he discusses the issue with his family, he might resolve it. Similarly, a business has two brains means heads of outsourcing and outsourced companies work together so they might find the best solution in less time.
As discussed in scalability, for a business to grow, you need to arrange some outsource employees to help you do a particular activity. Moreover, your business might grow throughout the country if you do onshore outsourcing.
An independent contractor will add experience to your organization and enhance operations while launching new projects. Following this approach, you may secure money and time by not dividing your firm into parts for different tasks. For example, if you need an IT department in your firm, you need a massive investment in technology and recruit employees that will demand high wages. Outsourced companies benefit you as they save you from all these complex scenarios.
High work efficiency and productivity
Productivity is fundamental for a business to earn more profit. Through outsourcing, you save labor costs and produce a high yield. When your company serves as the brain, and outsourced employees serve as other body parts, work will be far more accessible. These professionals can make your company products in the right way.
Outsourcing and Your Business; A Bigger Picture
Outsourcing suits your business in the best way. Irrespective of the business size, it helps you grow it. However, outsourcing benefits your business in different ways based on its size. For instance, a large business is responsible for cost-effectiveness and money-saving qualities, while a small business improves competency and makes a small business popular.
Use monitoring tools to track outsourcing employees
Employers fear that remote workers (outsourced employees) may be fraud or take money but do not provide the required results. For this purpose, you can install Employee Monitoring Software (EMS) into the systems and keep track of each move.
Outsourcing is cost-effective and money-generating since you do not need to recruit employees or create a factory to manufacture your goods. In-house staff benefits from outsourcing since it allows them to do the tasks for which they were employed. You are free to prioritize your work without feeling pressured by the tasks handled by the outsourcing provider. Additionally, by outsourcing, you may conserve internal resources like office space, technology, and power. Advantages of outsourcing include lower wages, scalability, affordability, improved productivity and work efficiency, business growth, improved competency, product quality, etc.
You require outsourcing when the ultimate goal is to yield high results with less investment. Hire employees outside your region and time zone and get your work going 24/7. Moreover, liberate your in-house workers from extra work, elevating your work productivity.
Business owners like outsourcing because it saves money or would otherwise be spent on high-rated labor. In some countries employees’ benefits and compensations like health care and workers ‘compensation are mandatory. So, to avoid these compensations, employers hire outsourced employees.
The following are four main reasons to outsource:
- Time flexibility
- Shared risks
- Labor cost
According to ISO (international organization for standardization), outsourcing lowers the cost pressure on companies.
If you want to outsource work, make yourself available on freelancing platforms and get outsourcing jobs quickly.