Initially, outsourcing was simply seen for companies as a way to cut costs. Processes like manufacturing and assembly used to be managed in overseas locations, where the costs were significantly lower. Wages and operating costs were also lower in these locations. However, as outsourcing continued, companies identified several more advantages. Advantages include having experts from different streams being accessible for specialized work, a larger number of workers and others. Let us examine these options one by one. We set out you the top 10 reasons to outsource:
1. Lower Costs
Lower operational and labor costs are among the primary reasons why companies choose to outsource. Tasks that are costlier to get done in-house are allocated to service providers who can offer the same services at a lower price. For instance, let us take a task that requires specialized training in some software. It might be cheaper for a company to outsource this task than train staff in-house. It does cost the company to hire an expert team from outside, but since this team accomplishes the task much faster and more efficiently than an in-house team, the long-term benefits would be with hiring.
2. Enhancing Competitive Advantage
Outsourcing provides companies with more opportunities to develop competitive strategies for the global market. It also helps increase product quality, lower costs for the firm and/or consumer or leverage the quality to cost ratio.
3. Delegating of processes
Companies also choose to outsource or offshore so they may continue focusing on their core business processes while delegating mundane time consuming processes to external agencies.
4. Access to Experts
Outsourcing and offshoring also enable companies to tap into and leverage a global knowledge base, having access to world class capabilities. Having access to experts not only lowers the long term costs, but also allows the company to explore new avenues and take up different types of specialized work. This, in turn, helps the company enjoy greater prosperity through the changing times.
5. More flexibility
The flexibility comes in several ways. For one, the company has a larger workforce, without having to maintain a large workforce permanently. Companies can have more workers on contract basis and do not have to worry about layoffs. This way companies can adjust their work capacities according to the changing requirements and trends in the market.
Further, outsourcing also equips companies to handle contingencies like unexpected delays, errors or changes in plans. Thus they can complete the projects in time to the satisfaction of their clients.
6. More Resources for Core Business Activities
With outsourcing, companies can free up their capital funds and time to focus on core business activities. The management can get administrative or other ancillary jobs done through the vendor.
7. Access to Latest Technology
When a company ties up with an outsourcing vendor, it gains access to the latest technology and equipment at the vendor's disposal, without having to purchase these equipments and technologies.
8. More Business Partners
In a good outsourcing relationship, the vendor works as your partner, sharing in your desire to take your company to its maximum potential. Thus, you gain access to a network of active business partners through outsourcing.
9. Delegating responsibilities
By delegating responsibilities to external agencies companies can wash their hands off functions that are difficult to manage and control while still realizing their benefits.
Outsourcing also enables companies to realize the benefits of re-factoring.
To summarize, companies undertake outsourcing and offshoring for a variety of reasons depending upon their vision and purpose of the exercise. But, undoubtedly, it has a positive impact on the company's performance and the quality of the final result. As a result, it increases potential customers' confidence in the companies working in the outsource.