Outsourcing is a business trend that has caught on quite feverishly in the past decade. Businesses realize that it is often a good idea to outsource mundane and low priority tasks to off-shore companies. Outsourcing such activities have reduced costs, expanded capacity, and increased growth in many businesses. This article talks about the functions of outsourcing and how it can help companies to develop and meet their desired objective and goals.
What is Outsourcing?
Outsourcing refers to how companies entrust specific business functions to outside vendors. These business functions usually are non-revenue generating and can include tasks like transaction processing, payroll, customer service, and inventory management, to name but a few. Any business process that can be done from an off-shore location can, in theory, be outsourced. Outsourcing is advantageous for businesses as it allows them to focus on job functions that are revenue-generating rather than ones that are not, which can lead to increased productivity and profitability.
Outsourcing activities can have certain advantages for businesses in terms of:
Cost Savings
Outsourcing business processes such as customer support, accounting, administration along with HR related activities can lead to substantial cost savings. This is primarily because off-shore companies in countries like India and the Philippines have much lower wage rates than that of the western world. Specializing in outsourced business processes are not only these off-shore companies cost-effective but also maintain the level of quality standards one would expect to see from an in-house team. As communication channels improve with advancements in technology, this trend is likely to grow as more and more companies look to outsource non-revenue generating departments overseas.
Increased Productivity & Efficiency
In most cases, outsourcing specific departments of your organization can help increase efficiency. This is because it is likely that the outsourced off-shore company specializes in that particular department and may have better expertise leading to increased productivity. Since time-consuming and mundane business processes get outsourced, this leaves more time to focus on core processes that will help grow and expand the business.
Reduced Investment on Infrastructure and Technology
By outsourcing departments such as accounting, HR, and customer support, a company can benefit from substantial infrastructure savings. Each of these departments would otherwise require the hiring of staff, office equipment, computer systems, and rental fees for office space. However, outsourcing the department means that the company no longer has to invest time and money into infrastructure development. Instead, they can use that investment money on marketing and R&D, which is more in line with core business processes that lead to providing higher value-added services.
Increased Flexibility
Things can often change rapidly in business environments. The introduction of new automated technology can make specific jobs redundant, and sometimes even entire departments within the organization may no longer be necessary. Outsourcing, to a certain degree, can protect organizations from such drastic changes by offering services such as virtual assistants and virtual customer support teams. These services can be made available in hours with the same level of professionalism and experience that you would expect from an employee hired in-house. Furthermore, such services can survive and adapt through the peaks and troughs of your business without the business itself having to incur substantial capital losses.
Conclusion
The trend towards outsourcing non-revenue based business processes has grown exponentially in the past decade due to the multiple advantages that it provides, as mentioned above. Especially in the Western world, where comparatively wages are much higher, costs must be reduced to remain effective and competitive. The easiest solution to this problem has been outsourcing, and it seems that this business ideology is here to stay!
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