Advantages of Outsourcing
Outsourcing takes place when a company farms out various professional responsibilities to external, third-party vendors. These can be located both domestically and overseas. Outsourcing can also take place through individual contractors that are either brought in to a company or hired remotely to take care of specific tasks. These responsibilities usually are related to business management and don’t necessarily pertain to the company’s core activities.
While outsourcing is not a novel concept, it has found new life in the 21st-century thanks to the capabilities of modern technology.
Cutting-edge communication and collaboration tools are connecting people across the globe in groundbreaking ways. Combining this with the ever-increasing power of automation — especially as it pertains to the streamlining of normal business activities such as accounting or sales — has made it possible to outsource numerous activities. These include, but are not limited to:
- Lead generation.
- Transaction processing.
- Customer service.
- Transcription services.
- Inventory management.
Nearly every area of businesses has been revolutionized by modern technology in recent years, making outsourcing a possibility in previously undreamt of ways. To understand whether outsourcing can help your business, and in what ways, consider the most common benefits of outsourcing select functions.
Perhaps the single greatest advantage of outsourcing is the simple fact that, when done right, it can save your company money. Typically, outsourcing a task will mean your business doesn’t have to worry about the overhead costs involved in hiring full-time staff members to take care of the task internally.
A full-time employee can require a salary, benefits, payroll taxes, training, equipment, and office space. A contractor, on the other hand, can come fully trained with their own equipment. They’ll often work off-site and don’t require perks or benefits.
Depending on the nature of the function you contract out to a third party, you may be able to enjoy significant savings compared to hiring even a temp worker — but you have to do the math to get a clear margin for your situation.
When you outsource jobs to an outside contractor or agency you’ll naturally have more time on your hands.
Rather than spending large amounts of time and effort on tasks that you’re not properly trained for — such as a small business owner trying to take care of payroll — you can hire a professional to do the same task quickly and efficiently. This, in turn, can allow you to focus on more crucial concerns such as client retention and providing the core services that set your business apart and allow it to exist in the first place.
While it’s already been hinted at, the niche skills and focus that you can get from outsourcing an activity is significant enough to warrant its own section. Hiring a dedicated specialist to tend to a basic need, such as accounting or customer service, may be out of the range of your staff budget. A small organization may not be able to justify creating separate departments for essential functions like marketing and sales. Contracting a professional to handle these tasks can provide all the benefits of having specialist teams and departments without the overhead — or even a full-time workload.
As if that wasn’t enough, you can also save yourself time and money that would have been spent training your current staff to learn new skills. While developing talent is an important part of any company’s long-term success, outsourcing allows you to invest in resources focused directly on your core business.
Many of the typically highlighted benefits of outsourcing tend to focus on internal considerations, such as increasing efficiency and saving money. However, outsourcing can also help you proactively gain a competitive edge over other businesses in your industry.
For instance, if you’re a law firm and you decide to conduct all of your marketing through internal personnel, you’ll likely need to either spend a lot of money on a professional marketing department or get by with your current staff.
However, if you invest in outsourcing your marketing needs, you may be able to:
- Increase your brand awareness and keep better control of your public image.
- Boost essential marketing results such as traffic and conversion rates.
- Take advantage of cutting-edge marketing tactics.
Tapping into these advantages by outsourcing tasks to third-party professionals allows your company the chance to level the playing field, even when it comes to larger competitors. In fact, it even enables you to scale your business’s operations as you grow without the need to necessarily increase the size of your staff, office space, or other overhead concerns that can come with traditional business growth.
Hiring staff means incurring new forms of risk — from the risk that talented staff might suddenly quit or fall ill, to the risk of malcontents spreading low morale. Employers are accountable for payroll taxes and complying with local and federal laws related to workplace safety. While it may not always be possible to eliminate all of the risks that come with entrepreneurship, outsourcing can allow you to selectively reduce direct risk by offloading it to your contractors.
Again, assessing the total risks of any particular project or function is something you’ll have to determine for your situation, but outsourcing can often provide some measure of security that makes your business less vulnerable legally, financially, or in other ways depending on your industry.
Finally, outsourcing significant portions of your business activities allows for a certain degree of flexibility when it comes to scaling your activities. If your business hits a slow point or goes through an economic downturn, for instance, you will already have a lean staff.
The logic works the other way as well. If you have a dependable uptick in business, such as seasonal work, you can easily increase your contractor workforce temporarily, and then part ways after a few weeks or months with little to no effort. In contrast, hiring and training new members of your staff is much more complicated and expensive, and often not worth the investment when you’re simply trying to meet temporary demand.
From flexibility and risk to efficiency, savings, and edging out the competition, there are many reasons to consider outsourcing as a way to improve your business’s operations.
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