6 Key Advantages of Outsourcing for Your Business

outsourcing for business

Over the last 15 years, outsourcing has grown to become an important component in business development strategy. What was once viewed as a stop- gap measure to address cost reduction has evolved into a process that can actively contribute to revenue generation.

The exponential growth of outsourcing corresponds with increasing turbulence in the global economy. Political regimes are changing; new foreign policies are being enacted and economies are re-aligning their resources.

All of these changes are proving to be a shock to the prevailing systems and have led to increased social discord in different regions of the world. It is not surprising that more businesses are outsourcing services as global business conditions continue to become more uncertain.

But if you want to maximize the benefits of outsourcing for your business, you must first develop an understanding of what the concept is.

What is Outsourcing?

Outsourcing is a process whereby specific tasks and responsibilities are transferred to a third party service provider to manage. In the 1970’s, companies would sub contract non essential tasks to third parties whenever revenues where stagnant and cost cutting was the way to maintain the bottom line.

Non essential tasks are those which are supportive in nature but not directly connected to the main enterprise of the business. It was a way of reducing costs because the third party service provider would assume all related expenses. Service charges would be reasonable because economies of scale existed.

As companies outsourced more services, they discovered there was more to the process than just cost savings.

6 Advantages of Outsourcing

Today, businesses may adapt outsourcing strategies not just for cost reduction purposes. There are many advantages the process could give to your business.

1. Streamline Business Expenses

Cost reduction remains the number one reason why businesses outsource. The cost savings you can generate from outsourcing can be quite significant.

The process lowers cost by capitalizing on comparative advantages and economies of scale. The foremost component where comparative advantage exists is labor.

Outsourced services involve contracted not fully employed workers. Thus, they are not subject to the same benefits as full-time employees. They are also accountable for their own costs of business. As the client, you don’t incur logistical costs for rent and incremental costs for Internet and power.

A good example would be contracting virtual assistants.

A Virtual Assistant is technically a proprietor of a business that provides virtual assistance services. You do not have to pay him or her government mandated and company benefits. In addition, he or she is obligated for the expenses of the business.

2. Increase the Level of Productivity

Do you often find yourself mired in emails, phone calls and managing appointments? If so, then you are losing productive time.

By delegating non essential or non core functions to a third party service provider, you can free yourself of these tasks and allocate more time to manage activities that matter more to your business.

Again, the Virtual Assistant is an excellent example. They are widely reputed for their high level skills in business organization. Virtual assistants are usually hired to oversee administrative functions that allow the business to operate seamlessly.

You can maintain 100% focus on managing the key functions of your company without having to worry if the administrative tasks are being handled properly.

3. Improve the Quality of Deliverables

The jump off point for global outsourcing in popularly thought to have happened in the 1990’s. This was a time when Information Technology was becoming a growth industry.

The Internet was still in its fledgling stages but companies were already looking for ways to capitalize on its possibilities.

IT companies from the US began to outsource services to IT companies in India. They realized the benefits extended far beyond just cost savings because the IT companies from India were able to improve the technology.

If you plan to introduce new areas in your business, it would be a good idea to outsource these to a third party service provider. Not only will you save time but you can improve its quality especially if the project falls under the core competence of the service provider.

4. Introduce a More Flexible Business Model

In a volatile business environment, flexibility is a highly- desired component of strategy design.

When markets are in a constant state of change, it is virtually impossible to predict or pinpoint trends and directions. Rigid business modeling will not help you adapt to sudden changes in consumer behavior and demand patterns.

Outsourced services allow for flexible business modeling. Again, these are contracted not employed services. The distinction emphasizes the flexible nature of the process.

With outsourcing, you can introduce changes on the fly. These include shifts in scheduling, changes in manpower and scope of work. You simply have to coordinate with the service provider to have the infrastructure in place to accommodate revisions in strategy design.

5. Reduce the Risk of Planned Business Expansion

One of the reasons why many small businesses close up shop within 5 years is over expansion. In a bricks and mortar setting, over expansion entails investments in assets that allow you to expand capacity.

But what if the increases in business volume cannot be sustained? You could be stuck with depreciating assets or left to grapple with mounting obligations to laid off employees.

In outsourcing, there are fewer constraints to expansion. It is easier to add or subtract manpower. You do not have to invest in infrastructure because it is the responsibility of the service provider to ensure contingencies are in place to support your operations.

If the expansion does not pan out, it is easier to suspend, revise or terminate the outsourcing arrangement.

6. Create Strategic Partnerships

An overlooked advantage of outsourcing is its ability to create strategic partnerships. The best outsourcing arrangements are those that evolve from a client- provider relationship to one of strategic partnership.

By definition a partnership is an arrangement where there is shared interest. Both parties in the partnership would contribute assets in the form of time, knowledge, expertise and experience that would help them achieve the common goal.

A strategic partnership fosters greater trust and a stronger working relationship. These are important qualities for long term success and sustainable growth.

If you are able to find a good outsourcing company to partner with, you should try to develop the relationship and aim for a long term engagement of services.

Outsourcing is a strategy that will service your business interests in 2017 and beyond.
By outsourcing services, your business will have a proven hedge versus economic turbulence.

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