The Many Advantages of Outsourcing - The Balance Small ...

Outsourcing can help your business lower costs, innovate, and grow · The Advantages of Outsourcing · Focus on Core Activities · Maintain Lower ... Operations&Technology Staffing TopOutsourcingAdvantages Outsourcingcanhelpyourbusinesslowercosts,innovate,andgrow ••• BlendImages-TerryVine/GettyImages TableofContents Expand TableofContents TheAdvantagesofOutsourcing CoreActivities MaintainLowerCosts PromoteGrowth OperationalControl StaffingFlexibility ContinuityandRiskManagement DevelopInternalStaff GettheMostFromOutsourcing By JamesBucki FullBio LinkedIn Twitter JamesBuckiisaformerwriterforTheBalanceSmallBusinessandthedirectorofcomputingtechnologyatGeneseeCommunityCollege. Learnaboutour editorialpolicies UpdatedonFebruary05,2020 Outsourcingisthebusinesspracticeofcontractingwithanoutsidepartytotakecareofcertaintasksinsteadofhiringnewemployeesorassigningthosetaskstoexistingstaff.It'sapopularwayforbusinessestoloweroperationalcostsandstreamlineoperationswhilestillhandlingimportantfunctions. Outsourcedtasksmaybeoccasional,suchashiringanaccountanttodoyourtaxesonceayear.Theymayalsobearegularpartofbusinessoperations,suchascontractingwithacleaningfirmratherthanhiringjanitorsasemployees. TheAdvantagesofOutsourcing Thebusinessesyououtsourcetomaybeindependentconsultantsorotherlargecorporations.Nomatterthesizeofthebusinessyouworkwith,contractingoutoperationaltaskscanprovideavarietyofbenefits. KeyTakeaways Outsourcinghelpsyou:FocusoncoretasksLowercostsPromotegrowthMaintainoperationalcontrolOfferstaffingflexibilityProvidecontinuityandriskmanagementDevelopinternalstaff Fromsoleproprietorstolargecorporations,businessesofeverysizecanuse outsourcingtohelptheircompanygrowandexpandwhilekeepingexpensesaslowaspossible. FocusonCoreActivities Theback-officeoperationsofacompanytendtoexpandduringperiodsofrapidgrowth.Thisexpansioncantieupyourhumanandfinancialresourcesattheexpenseofthecoreactivitiesthatmadeyourcompanysuccessfulinthefirstplace. Outsourcingimportantbutmundaneactivitiescanallowyoutorefocusyourin-houseresourcesontheactivitiesthatmakeyouprofitablewithoutsacrificingqualityorservice. Forexample,let'ssayyourcompanylandsalargecontractthatwillsignificantlyincreasethevolumeofpurchasinginashortperiodoftime.Byoutsourcingpurchasingresponsibilities,youfreeuppersonneltofocusonthecontractitself.  MaintainLowerCosts Sometimestheexpenseofpurchasingequipmentorneedinganewlocationcanbeprohibitive.Inthesecases,it'smorecost-effectivetooutsourcethantoexpandoperationsinternally. Ifthegrowthofyourbusinessresultsinanincreasedneedfor officespace,tryoutsourcingsimpleoperationssuchastelemarketingordataentryratherthanmovingtoanewlocation.Itmightcostfarlessthanthepriceofexpanding,anditisbothmoreefficientandlessexpensivethanrelocating.  Outsourcingcanalsolowercostsbyreducingtheexpensesassociatedwithbringingonnewemployees,suchas: Ahiringsearch Onboarding Healthcareandotherbenefits Payrolltaxes IncreasedneedforworkersinmanagementandHRpositions Workingwithcontractorsratherthanemployeescanminimizethesecosts,allowingyourbusinesstogetthesameamountdoneforless. PromoteGrowth  The overhead costsofsomeoperationsareextremelyhigh,butyoumightwanttoofferthemtosatisfycustomers,expandyourbusinessmodel,orcompeteinthemarketplace.Outsourcingcanbeagoodoptionifthecostofexpandingtohandlethoseoperationsyourselfistooexpensive,wouldtaketoolongtoeffect,orwouldcreateinefficienciesinyourbusinessmodel.  Forinstance,yoursmalldoctor'sofficewantstoacceptavarietyofinsuranceplans,butonestaffmembercan'tkeepupwithallthedifferentprovidersandrules.Outsourcingtoafirmthatspecializesinmedicalbillingwillcostlessthanhiringadditionalskilledstaffortrainingexistingpersonnel,whilestillincreasingthebenefittoyourcustomers. MaintainOperationalControl Operationswithrisingcostsshouldbeconsideredforoutsourcing.Departmentsthatmighthaveevolvedovertimeintouncontrolledandpoorlymanagedareasaregoodcandidates.Anoutsourcingcompanycanoftenbringbettermanagementskillstoyourcompanythanwhatwouldotherwisebeavailablewithoutsignificantrestructuring.  Forexample,let'ssayyourITdepartmenthastoomanyprojects,notenoughpeople,andabudgetthatfarexceedsitscontributiontoyourorganization.AnoutsourcingagreementwithanITcontractorwillforcemanagementtoprioritizetheirrequests,bringingprojectsandspendingbackundercontrol. OfferStaffingFlexibility Outsourcingallowsoperationsordepartmentsthathavecyclicaldemandstobringinadditionalresourceswhenthey'renecessary.Theoutsourcingcompanycanthenbereleasedwhenthingsslowdownagain,maintainingacompany'sflexibility.  Outsourcingfunctions,suchaswhenyouraccountingdepartmentisshort-handedduringtaxseasonandauditingperiods,providestheadditionalresourcesyouneedforafixedperiodoftimeataconsistentcost.Workingwiththesameaccountingfirmorcontractoreachtimeprovidesconsistencyinadditiontoflexibility. ProvideContinuityandRiskManagement Periodsofhighemployeeturnover canadduncertaintyandinconsistencytoabusiness.Outsourcingprovidesalevelofcontinuitytothecompanywhilereducingtheriskthatasubstandardlevelofoperationcouldbring,evenoverashortperiodoftime. Forinstance,your HRmanagerisonextendedmedicalleaveandheradministrativeassistantisleavingforanewjob.Outsourcingthehumanresourcefunctionreducesriskandallowsthecompanytokeepoperatingwhilethemanagerisunavailable.Italsogivesyoutimetohireanewassistantwithoutrushingthedecisionbecausetheofficeisunderstaffed. DevelopInternalStaff Alargeprojectcanrequireskillsthatyourstaffdoesnotpossess.On-siteoutsourcing,whereyoubringincontractorstooperateatyourownlocation,canprovideyouwiththepeoplewhopossesstheskillsyouneedwhileyourpeopleworkbesidethemtoacquireanewskillset. Let'ssayyourcompanyneedstoupgradecustom-builtequipment,butyourengineersdon'thavetheskillsrequiredtodesignthenewandupgradedequipment.Outsourcingthisprojectandbringingtheoutsourcedengineerstoworkon-siteallowsyouremployeestolearnfromthecontractorswhileensuringthatthejobisdonewiththenecessarylevelofskill.  HowtoGettheMostFromOutsourcing Businessesoftenthinkaboutoutsourcingpurelyintermsofcostsavings,butoutsourcingcandomorethanjustlowerexpenses.Asyourbusinessgrows,outsourcingcanbeawaytopromoteinnovation,disruptyourindustry,andaccessnewskillsetsthatrepositionyourcompanyinthemarket. Whenconsideringhowoutsourcingcanhelpyougrow,don'tlimityourselftolookingatthecostofhiringoutsidecontractorsversushandlingataskwithyourcurrentstaff.Focusonthevalueacontractor'sexpertiseaddstoyourcompany.Whetherthroughexpandingproduction,marketingyourcompanymoreextensively,ordisruptingthewayyourindustrydoesbusiness,outsourcingcanprovideanopportunityforyoutoinnovate,grow,andriseabovethecompetition. ArticleSources CarnegieMellonUniversityLanguageTechnologiesInstitute."OutsourcingDecisionSupport:ASurveyofBenefits,Risks,andDecisionFactors."AccessedFeb.5,2020. U.S.SmallBusinessAdministration."10SmallBusinessFunctionsThatCanBeEasilyOutsourced."AccessedFeb.5,2020. Knowledge@Wharton."It’sTimetoTalkSenseAboutOutsourcing."AccessedFeb.5,2020. HarvardBusinessSchoolWorkingKnowledge."HowtoThinkStrategicallyAboutOutsourcing."AccessedFeb.5,2020. Share Tweet Share Email WhatIsOutsourcingandWhyDoCompaniesDoIt? 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