Outsourcing, simply put, is assigning your less important activities to someone else while you focus on the most important activities.
There are many instances when you can outsource activities in your business. If you are planning out a business and you lack the expertise to perform certain tasks, you can outsource them to third-party service providers. When you let someone else handle a particular business function, it is known as outsourcing. It is a very common practice in several businesses.
In today’s world, almost everything can be outsourced based on your comforts. Some of the common services that are outsourced include Technology services, HR services, and manufacturing processes, among others. You can either outsource an entire division for your business or just a part of it. This is often based on how much you can afford and what you need. When you are outsourcing certain redundant activities, you are increasing your grip on your business’ productivity.
An Outsourcing or contracting business usually involves larger third-party service providers or sometimes even independent contractors. Outsourcing, a hotly debated topic, has its own pros and cons. If you are confused about when to outsource a particular process, we’ve got you covered. Below, we have listed various instances when you can outsource.
However, if you’re too busy to read it, you can take our outsourcing self-assessment test to find out if you should outsource a particular business function or activity
Why/When Can You Outsource?
If you have a business and are looking to outsource certain processes of your business, you need to understand why & when you should outsource. As a business, you should outsource tasks or work which are repeatable and don’t add value to your business. By outsourcing these tasks you can focus on core business activities and by giving such tasks to experts in the field, you can get the job done more effectively and even spend less.
To Focus On Your Core Business
When you are running your own business, there are several back-office tasks that require attention. It is quite true that doing this on your own can divert a lot of attention towards this. You might as well use this energy to scale up your core business. While doing so, you are not only increasing productivity but also are focusing on generating an income. If you think you are an entrepreneur who can get such redundant tasks done, you are just stalling your growth. Remember, smart work is better than hard work.
Many companies including the smaller ones outsource common jobs such as call handling and marketing. If you have a bigger business, then you can outsource even tasks such as payroll, IT, Research and development. While outsourcing is great, you should also remember not to outsource any core competencies of your company. That would be a grave mistake. If you are planning on a clothing brand, you can outsource the manufacturing processes. However, outsourcing the design part of it would be deadly as it may be the key differentiator for your brand.
Less Internal Resources
If you have lesser internal resources including manpower, instead of hiring any new talents by yourself, you can outsource either to a larger company or to smaller independent contractors. This helps you to save money and also would help you get new well-trained employees.
If you want access to a larger talent pool instead of just your small, local talent pool, outsourcing companies help you gain access to talent from different parts of the world. This can also help you when you need temporary assistance.
If you want to scale up your e-commerce clothing brand from just drop shipping to manufacturing custom products, you can outsource it. When you outsource manufacturing processes, it is often because the third-party manufacturer knows quite a lot about this. This can include finding raw materials that are available not only of your desired quality but also at affordable prices. You can produce good quality products while saving a lot. You and your team need not go hunting for various manufacturers to get several processes done. Instead of doing this, find one reliable, outsourcing contractor to get it done.
Difficult To Manage Skills
The world is in the middle of a digital revolution. Almost all companies are transferring from an offline medium to online platforms. In India, many companies these days outsource digital marketing services to help them complete their digital onboarding. Some of the digital requirements include designing websites, running advertisements, and writing blogs. This not only helps them to complete skilled tasks but also allows them to complete them efficiently.
A smaller outsourcing firm that specializes in these tasks will have industry-level expertise that will help you save up on the money you might have to pay while hiring a full-time executive. When there are processes and operations that are new, but you lack the know-how and skills required, you can outsource.
Expand And Understanding Newer Markets
When you outsource certain requirements to a third party, you are able to expand. Apart from sharing operational risks, when you are doing it offshore, you can also ensure that no operation is interrupted by any unexpected shortage. When you outsource, you are transferring any responsibilities to an organization you know can do a better job. You can increase your brand awareness among your consumer market. Let us take the example of having a call center. If you are planning to penetrate foreign markets, having a call center with multilingual personnel is a smart move.
When you become a testimonial for your outsourcing company, you are exposing yourself to a new follower base. Additionally, you are also getting a chance to gain new leads. Whether your outsourcing company is foreign or located on the other side of the world, you can outsource your activities.
Reduced Overhead Costs
If you need a specific skill for a certain period of time, for example, developing a website, instead of hiring an IT personnel, you can simply outsource this. By outsourcing, you will reduce costs. If local talent is expensive, you can outsource using BPO companies. This will help you have well-educated staff at lower costs than your local counterpart. Doing this will also help you save any equipment and training costs. When you consider a full-time employee, it can include taxes, equipment such as phones, computers, and the cost of managing them. Outsourcing helps in cost-cutting. It also helps you gain access to specialized talent while maintaining efficiency and productivity.
To sum it up, yes, cost-saving is one advantage of outsourcing. But for your business, outsourcing can do more than cost-cutting and lowering expenses. Most importantly, outsourcing can help in focussing on core competencies, marketing your company, and even innovating. Simply outsource if your new product requires something difficult to do but isn’t part of your core business, such as a high-tech requirement.
When You Can Outsource? FAQs
Q1. Is there a disadvantage of outsourcing?
A1. Like everything else out there, even outsourcing has its disadvantages. It can include communication difficulties. You also should not outsource when handling extremely sensitive data. Remember, it is better if you can outsource only when there are tasks that are boring and not a part of your business’s core.
Q2. What are the types of outsourcing companies based on their location?
A2. There are three types of outsourcing companies. These include local outsourcing, offshore outsourcing, and nearshore outsourcing. Based on your requirements, you can outsource various activities accordingly.
Q3. What are the most commonly outsourced activities in smaller businesses?
A3. Marketing, Content writing, accounting functions, customer support, and Human Resource Management are the most common activities that you can outsource.
Q4. What are the different types of outsourcing based on the service required?
A4. The most common types of outsourcing companies include professional outsourcing, IT outsourcing, project outsourcing, and manufacturing outsourcing.
Q5. While you outsource, what are certain things that you need to keep in your mind?
A5. When outsourcing, keep in mind to prepare good contracts, communicate your agreements well, and research your outsourcing company thoroughly to avoid any future problems. Make sure there are proper service level agreements in place (SLAs) so that you can measure your ROI on outsourcing activities.
If you have just started a business or planning to start one very soon, use our AI-powered business assessments to help you make fast well-informed decisions on every aspect of the business.
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