4 Reasons Why Outsourcing Should Be Your First Option
Outsourcing has become quite the rage in the business world. Everyday, new companies emerge and are created with an idea of creating a business from scratch. Some choose to start small, while others look for bigger companies that can provide them with exactly what they need. In this case, we will look at the idea of outsourcing and see exactly how it can benefit your business.
When hiring outsourcing companies, businesses have the option of hiring someone who will handle the entire process, or just part of it. Outsourcing is usually an agreement where one business hires another business to perform some pre-planned or already-created activity or function or would rather hire a third-party to perform those tasks instead. If you decide to outsource, then you will most likely be hiring someone for an hourly rate. This means that each task will only take up an hour or less of work, depending on the level of expertise needed. The total number of hours could go as high as twelve hours per task, if needed.
Let us look at how outsourcing can benefit your business in the areas of improving quality and solving capacity issues first. Let’s say that you have a firm that specializes in solving complex problems. You want to increase your company’s efficiency in this area so that you can get more customers and earn more revenue. In order to increase productivity and lower costs, you decide to outsource some of your problem-solving activities to a third party. This results in a couple of things:
a. A reduction in workforce cost: By outsourcing some of your core business processes, you are able to free up some of your staff, especially on the front end, which results in an increase in staff productivity. More production means more sales, which means a boost in profit. This is a win-win situation for both parties.
b. A reduction in physical infrastructure costs: Outsourcing your physical business processes allows you to tap into the talented human resource resources of external agencies. This way, you do not have to hire and train new full-time employees, which is a heavy investment. Physical activities include accounting, payroll, recruiting, training, and medical benefits administration. These activities are costly, but when outsourcing to third-party contractors, they are reduced by almost half.
c. A lower cost of ownership: Businesses often have limited or no capital to invest on their own. This limits their capacity to earn profits on the market. When an outsourcing provider delivers a project at a low cost, it is possible to leverage your business’s existing resources to attain better quality and lower costs. In other words, you are able to retain and upgrade the value of your assets.
d. A change in business culture: A company’s success is largely dependent on its culture. Companies that outsource their business activities usually embed a culture that promotes professionalism, efficiency, reliability, and innovation. This fosters more effective and happier employees. As a result, companies are able to attract and retain high quality candidates.
There are compelling reasons why companies should consider outsourcing their business processes. Companies should first evaluate their current processes to determine if outsourcing is the best strategy. Then, they should determine whether outsourcing will increase their profitability, reduce their cost base, or increase their productivity. Finally, they should determine whether their current outsourcing strategy provides a positive impact on their business goals. If so, then outsourcing might be just what companies need to address their competition, achieve higher levels of productivity, improve their quality, and lower their cost base.