Outsourcing is a direct relationship between two or more organizations where one company hires another company for their services. More often than not, these are vital functions that can be done by the company but choose not to for several reasons. Because of this business tactic of hiring other companies to do the job for them, the B2B (Business to Business) industry was born. Today, instead of companies acting as lone islands with complete departments, enterprises now rely on each other.
According to an Armstrong & Associates report, over 90% of Fortune 500 companies outsource their logistics and supply chain services. Deloitte reported that 31% of all IT services were outsourced. Outsourcing has become such a normal business operation that Statista reported that the global outsourcing industry generated over 88.9 billion US dollars in revenue.
Outsourcing has transformed to be a legitimate business management strategy that frees up multiple departments of a company to pay attention to more important tasks. Here I have outlined some of the biggest advantages of outsourcing.
Focus On Important Tasks
The corporate life is riddled with many unnecessary tasks that do not necessarily align with anyone’s job description, thereby leaving everyone to do it. By outsourcing logistics management, your employees are now freed up to focus on their actual jobs which greatly increases productivity. Your staff will greatly benefit from the less restricting schedule resulting in a considerable boost in morale. A happy and highly productive office? That’s one rare thing that you can’t just achieve in an instant.
When you outsource companies to do specific business functions for your company, this usually means that they are considered professionals and experts on the field. Having specialists in the field to complete the tasks for you will mean a higher quality of output. Assuming that they have been in the trade for quite a while, these vendors already have prior knowledge on the exact process and what to do should any problems arise. This ensures a quicker completion of the task as well as they bring in years upon years of experience.
This is ultimately better than plunging a new staff directly into heavy work and overloading him/her. Quality is also not guaranteed as he/she simply hasn’t yet learned the many tricks of the trade. Training a team also costs so many resources that most just rely on outsourcing. HR Management, for instance, can be extremely troublesome and expensive which results in many companies outsourcing their HR functions.
Reduce Operation Costs
Reducing operation costs is, perhaps, one of the biggest advantages of outsourcing. With the economy crashing harder than ever, many companies are left with no choice but to downsize their organizations to keep the entire company afloat. This leaves them with vital tasks that no one has the time or the skill to do. The ability to outsource vendors allows the company to save up the costs of recruitment and training new staff.
By outsourcing to developing countries, companies receive the same output but for a lower cost. Because the living expenses in other countries such as India and China are lower, the average income is also lower. The difference in cost from operating in the West vs. in Asia can go up to 60%. Many companies, after realizing the prime savings they can get, take it a step further by establishing a WOFE in another country, altogether.
Save Up On Office Space
Office space is steadily increasing in price leading to many companies to choose a smaller office space than they actually need. Hiring not even a team but a single employee when you’re already out of real estate will definitely cramp everyone in the office which could lead to a decline in everyone’s productivity levels.
By outsourcing key business operations, a company saves up on company infrastructure and office space. There is also no need for the enterprise to spend on office equipment such as laptops, printers desks and office chairs.
No Need For Expensive Softwares
While automated softwares are convenient and streamline specific business operations making them more efficient and cost-effective, it must be noted that they are quite pricey and could cripple small to mid-sized businesses in terms of finances. Not only that but a certain amount of tech-savviness and expertise is needed to properly navigate through their interface which would require a specialist to be appointed just to handle each software, especially if they are too complicated for the office manager to handle. This means that you are then back to being down one employee and resources going down the drain. Outsourcing will give you the opportunity to avoid these costs.
24/7 On The Clock
Some companies are smart and take advantage of the different time zones around the world. The tactic is that companies choose to outsource their operations from a country that is of a different time zone as theirs. What this results to is that when they close up shop, their outsourced company wakes up on the other side of the world so, on the next morning, all the work they needed to be done is already completed ensuring that no time is lost just waiting for one party to be finished with their work so the other could start with theirs.