With a market worth over $130 billion, outsourcing has emerged as one of the leading cost-cutting strategies in organisations. With all eyes focussed on the negatives of outsourcing, the world has grown to ignore its benefits. It starts with a definition which can broadly be stated as, “the practise of taking up contractors to work on business services that would have been, traditionally, completed in-house by the company’s staff and teams”. Outsourcing has been a subject of immense controversy, the opposed have one argument saying the practice kills job opportunities, majorly in the manufacturing sector. This stigma is what we attempt to eradicate through this article, where we will understand outsourcing, its benefits, and why it is a good business initiative for companies.
Alternatively known as Business Process Outsourcing (BPO), the use of outsourcing has existed as a business strategy since 1989. It comprises not just cost-cutting through externally hired personnel. It has layers upon layers that talk of business efficiency and the empowerment of small businesses to perform specific tasks. Taking the example of a business where the accounting is managed by a different organization which specialises in managing records, this not only gives professionals a chance to do what they do best but gives the company confidence in knowing that their work is in good hands. Outsourcing is often misunderstood because of its job reduction factor, but from a bird's-eye view, it does more good than harm. Continuing on this frequency, we go on to break down outsourcing to its benefits in the following paragraphs.
Outsourcing is done for one primary reason in companies: saving money. It, in no way, correlates to job deficiency or downsizing. A company’s decision to outsource comes from a variety of factors, be it business moderation for growth or to give complete control to a set of professionals without the need of hiring employees. This not only improves the organisational structure but further helps in bringing professionalism to one or more aspects of a company. Keeping service in a company requires a complex organisational system from hiring the right individuals to assigning their positions and responsibilities. The same is a pre-set in outsourcing where the system has already been established and all one has to do is assign the responsibility to the service provider. Thus, outsourcing simplifies a job, reduces costs and brings professionalism and skill into a company.
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Core Activity Focus
Companies often lag in the market because most of their employee strength goes into working on non-core tasks. The workload increases with every non-core activity added into the mix. The company risks losing its precious work time and resources when all of them are put into such activities. To conserve these resources and enhance functionality by focusing on only the core tasks, third party managers can come in handy. Their services not only manage non-core activities but ensure that this management is done perfectly, thus giving the company back its resources and enhancing its working.
All risks that come from company-related hazards can be managed efficiently if shared with a third party outsourcing company. It ensures the equal sharing of losses and keeps both companies above water. Such a risk-sharing partnership between two companies additionally reduces the burden on the less skilled staff in-house by transferring it to the better trained third party.
Multinational businesses hold their power and maintain it by running the company 24x7. Different time zones disrupt the workflow of organisations, but keeping an outsourcing partner means that the company can work in multiple time zones with the help of partners from various countries. It reduces the losses occurring via the inactive business during night hours.
Improve Customer Service
An outsourcing partner is hired in one specific field, which means they have the skill and staff to keep up the flow of work and deliver the best output. Such outsourcing supports the staff to do what they do best and focus on their skill-set. Better output results in better services, which in turn gives the company a chance to provide their customers with the best services. Good service and deliveries enhance the reputation of a company and keep the customers coming back, thus creating loyal customers and bettering consumer satisfaction.
Better Management Environment
A business often complicates itself by creating a complicated work network by interconnecting the various branches and teams. This is resolved by the involvement of a set of skilled personnel who can take one branch upon themselves and work independently. This means that what used to be a complicated network on one end is resolved to just one line of work between the main company to the third party.
Get a Competitive Edge
As stated above, better customer service gives a stream of loyal customers to an establishment. These loyal customers keep the work coming in and increase the overall profit of the company. The market runs on such profit and companies with well-planned strategic outsourcing know how to stay ahead in such an environment. Their services are better compared to the others, and they obtain a better reputation and trust from the incoming consumers. This lifts its position in the competitive market and gives it an edge over the others.
Outsourcing has, without a doubt, gained a negative reputation over the decades. Despite a bad spotlight on its face, it continues to grow and expand. Since its establishment in the 1900s and its growth over the years, it has proven to be a strategy that works for all in every situation. Keeping in mind the various aspects of handling and managing a company, everyone looks for a way to simplify the ever-growing complexity of managing it all. Outsourcing keeps all under control and gives the companies a chance to focus on more pressing matters at hand. It does cut down on jobs but makes sure it creates similar opportunities in specific skill requiring sectors. The high skill talent required by companies earlier has been reduced to a simple hiring process. The pros of outsourcing outweigh the cons, which is why it is preferred by small and large businesses alike and will continue to do so in the coming years.