Why Has Outsourcing Become So Popular?

Outsourcing has become one of the most effective tried-and-tested models for profitable business operations. In fact, it has been acknowledged as a successful competitive strategy that enterprises can use on a long-term basis. Outsourcing and offshoring can help companies concentrate more on their core business while simultaneously controlling expenses.

Outsourcing Definition: It can be defined as the process that allows a business to integrate third parties into the organization in order to fulfil one or more aspects of the business. Most of the time, this third party is equipped with the necessary expertise specific to the company’s requirements, and undertakes the full responsibility of the function on behalf of the company.

What Makes Outsourcing So Popular?

Reasons for outsourcing mainly include lowering a company’s costs, reducing the investments of an enterprise in capital expenditures, reducing the need for in-house staff training, and generally improving the utilization of a company’s resources.

The following benefits explain in greater detail why outsourcing has become more in demand in recent years.

Greater Expertise:

Whenever a business opts to outsource certain areas like marketing or accounting, the company looks for assistance from experts that have superior knowledge and experience in these fields. These resources are built on providing specialized assistance and because it’s their core offering they’re often better situated to deliver a higher quality service. It’s their business to ensure that the requirement of the company is fulfilled in the best possible way.

Effectively Controls The Cost Of Operations:

One huge advantage that offshore resources have to offer, is their cost-effectiveness. The majority of offshore service providers are based in developing nations such as India and Philippines where labour costs are comparatively low. Outsourcing services to any of these countries helps a company financially, as the company can get high quality work done at lower rates. Moreover, a company can also make financial savings from operational costs as they don’t have the associated costs of administration, payroll, rentals, HR, and utilities. For this reason, there are cost efficiencies to be had simply by outsourcing to more specialised operations locally. While the savings aren’t as dramatic, they can still be worthwhile.

Less distraction from Core Business:

Once the less important tasks are assigned to other service providers, the company does not need to fragment the attention of its personnel over so many diverse areas. This allows more time and energy for concentrating on the most important business matters of the company, its core competencies. The external resources provide on-time delivery, and updates, which allows the business to run more smoothly, as crucial matters gain priority and full attention of the company.

Improvements in Communication Technology make it viable:

Improvements in Communication Technology mean distance is no longer an issue and quality can be managed and maintained. Companies can easily provide detailed information of the required task as well as monitor the progress of their assigned tasks to the outsourced service provider through emails, voice and video conferencing and other online facilities that are cheap yet crucial for strong communication between the company and the offshore resource. In this way, companies can ensure that the job gets done the right way without spending a fortune on communicating with the offshore service provider.

Ensures Reduction In Infrastructure Investments:

With tasks such as voice processing and IT related projects being handled by an outsourced service provider; the company does not need to invest in expensive infrastructure for their in-house facility. The cost for a company to provide state-of-the-art infrastructure including IT systems, technical helpdesks, call centres for customer support, among others, can be prohibitive. Alternatively, this cost can all be avoided by simply outsourcing these requirements to externalised service providers.

Frees Internal Staff:

Another benefit from opting for external assistance is that the company’s in-house staff are relieved from the pressure of multi-tasking or focussing their attention on insignificant functions. The core team can then dedicate their time and energy towards accomplishing mission-critical activities. For instance, getting tasks like billing, transcription, claims processing and other less important jobs outsourced, can help health care practices focus on crucial matters like taking care of patients.

Results That Can Be Measured:

The best part of outsourcing is that the company that outsources can plan ahead of time its exact requirements and then hand over the responsibility to the external service provider to get it done within a given time frame. This allows the company to be in control over the task and incorporate it according to the business strategy of the organization. This ability to measure the results helps a company to set realistic goals, which proves highly beneficial for the growth of the company.

Makes Way For Flexibility:

Rolling contracts are common when it comes to outsourcing services. Providing everything works according to the company’s requirements, the particular service provider can be re-hired for more work; however, if the company faces either a financial crunch, a change of requirements, or they simply aren’t satisfied with the quality of the deliverables, then it can easily refrain from renewing its service contract. This allows the company to be more adaptable, being able to move into a better position more quickly when circumstances change. It also means significant savings in both time and cost, when compared to the processes involved in hiring and firing staff.

Useful In Surviving Seasonal Workflow:

Since the majority of companies that look for offshore resources are based in developed countries, some of these companies are subjected to staff shortages because of seasonal workflow. Such fluctuations occur during off-seasons and holidays when the attendance of in-house staff runs low. External resources can help a company deal with workload during such times and that too, in a cost-effective way.

Gives Access To Newer Technologies:

Not only does a company get access to experts when it opts for external resources, but the company also profits from the new technologies incorporated by these specialized outfits. These technological advancements come with minimum downtime as well as increased quality and productivity. Outsourcing helps companies get access to advanced infrastructure and capabilities. Dedicated teams with experience in required functions work to offer improved operational efficiencies.

Helps In Overcoming Talent Shortage:

At times, countries face acute shortages of talent, which results in higher demand for a skilled workforce. With the advantage of outsourcing and offshoring these requirements for qualified and experienced professionals, companies can avert situations that could otherwise result in significant losses.

Freedom From Stringent Rules For In-House Employees:

Most developed nations have stringent rules for management of in-house employees such as paid leave, superannuation, penalty rates, dismissal laws, and so on. When a company chooses to outsource some of its tasks to other businesses, those businesses are responsible for the management of whatever employee regulations that are applicable.

New Technology And New Outsourcing Platforms Make It Easier:

With the steady arrival of new platforms designed to make the hiring of specific types of outsourced tasks easy and effective, more diverse businesses are able to engage with a broad array of services and make it work within their business model and incorporate it into their business processes. With platforms such as airtasker.com, iwriter.com, freelancer.com, 99designs.com and fiverr.com just to name a few, the range and scope of works that are available for business to take advantage of are expanding daily.

Global Expansion:

Distance has become less and less of an issue in today’s fast-progressing world, especially with the availability of online resources. Micro companies can now expand into the global marketplace with relative ease, something which used to require a business to be well established and gargantuan, before they could seriously entertain a global expansion initiative. The advances and cost reductions in communication technologies are at the heart of this shift. Working with offshore resources can also be part of this global expansion initiative, as companies then have people with feet on the ground and local knowledge, in more diverse and strategic locations.

Gives A Competitive Edge:

There’s no doubt that the cost savings and the streamlined business operations that come out of outsourcing, can give an advantage to the companies that are among the first to embrace it. As more and more companies implement the strategy of utilising offshore resources, it creates pressure on those companies that don’t. For some businesses, indeed some industries, the need to remain viable and competitive has forced them to resort to cheaper workforce options, even if they would have preferred to employ locally. So the competitive edge is relative and gives way to necessity, as outsourcing becomes the norm.

 

In Conclusion:

Outsourcing has been subject to various controversies, but with the overwhelming benefits associated with this strategic move, it is hard to deny the popularity of external resource providers. Many new companies are coming up with plans to have their work outsourced to various offshore locations. And most companies chalk out their overall business strategy around the functioning of external resources and service providers. Some experts have also come to the conclusion that outsourcing is beyond cost cutting, and has become a successful business model in itself. No wonder its demand is growing by the day.