What is Outsourcing Business
In this technology-driven world, outsourcing has been a major talk among business people. It is a business practice of lending a particular job works outside a company in spite of handling them in-house is called outsourcing. Companies whether it small or large are turning their face towards outsourcing.
The outside company referred to as a service provider or a third party provider, have their own employees and systems to perform certain tasks or services either at external locations or on-site at the recruiting company. This type of business is sometimes termed as BPO(Business Process Outsourcing) or contracting out. Outsourcing includes both domestic and foreign contracting. Outsourcing is commonly divided into onshore, offshore and nearshore outsourcing. These terms are used based on geographical locations. For instance, if the company is located in the USA/ Australia it is named as offshore. In Eastern or Western parts of Europe, it is called as nearshore.
Many businesses are opting for outsourcing strategy and dynamically changing their business strategies. It has grown leaps and bounds from the time of its inception in 1990. Many companies like Expensify, GitHub, Groove entrusted the outsourcing services to run their business smoothly. This not ensures the efficient functioning of the works, but also helps in delivering quality service, improved productivity and cost reduction.
Types of outsourcing
Compared to the earlier era, outsourcing has become a business strategy for present day business people. This is the way to reduce costs. This necessitated functions essential to run a business but not particularly correlated to the core business. Generally, managers contract emerging specialized companies to address outsourcing services like human resources, data processing, accounting, maintenance work, security and more. These outsourcing services are highly regarded even today. Nowadays, while shifting to outsourcing managers need to understand the main categories under which they can go for outsourcing. The following are a few of the categories:
- Admin Support/Back office
- Customer service
- Online marketing & SEO
- Web development and design
- HR services and Accounting
- Sales support and marketing
These all can be categorised under Professional services, process-specific, operational, manufacturing and project outsourcing. When planning to go for cost-effective measures and equally while improving performance then outsourcing is the best option.
It is very obvious for enterprises to outsource their complex processes and tasks. Most of the outsourced projects are related to skill based like IT, accounting, legal and administrative support. A huge amount of money on overhead is saved by outsourcing these services. As the company pays only for the services actually utilized.
Process outsourcing is the term used to define handling very niche processes. Generally, these procedures include a specific contract that’s assigning nitty-gritty stuff like customer contacts, delivery timelines, and costs. With this type of outsourcing, companies can concentrate more on the core strength and enhance their customer service. Many companies outsource the products which are twirling around their main stock. For instance, the bakery industry normally outsources their delivery of a baked or packaged cake to a courier company like FedEx and UPS.
This is the most looked forward type. The cost of producing your own products is relatively high. Raw materials consumed and paying for the factory workers is huge. Moreover, if you outsource your manufacturing job to China, you will get it for a much lower cost. This has been becoming a trend from the past few years. Companies are drifting towards lessening blue collar jobs. For instance, take a car manufacturing industry. It becomes a tedious process to fix windows in their models. Hence to cut down their products cost and assembly time, they are utilizing it by outsourcing.
This is the ideal model for businesses that are converged on addressing the desired output than the expected results. These services are outsourced to manage entire or to complete the portion of the project. Most often, project outsourcing occurs as companies simply don’t have enough available skilled people in-house or there may be a delay in timings. For this, it’s an appealing choice to go for project outsourcing.
Reasons for outsourcing
Outsourcing entails hiring outsourcing service companies or outsourcing solutions through different companies to handle complex business activities. The purpose of outsourcing is to gain edge not only in terms of costs. Nowadays organizations are reaping many benefits like skilled expertise, flexible staffing, reducing turnaround & overhead, increased efficiency and more. Let’s take a detailed look at some of these
What are the travails businesses are facing today? Tough competition, poor supply of skilled expertise, and sky-touching costs are among them. Outsourcing companies enhance services and experts at affordable prices. If these two glitches are handled then businesses can focus on other aspects like competitions.
The Outsourcing firm primarily invests in equipment and efficient resources such as technology, employee training, and similar essential sources. This makes the business attain a higher degree of process and output know-how. In fact, impressing your clients gains t build a long-term relationship that creates a recursive business.
One of the major benefits you get while outsourcing your business is that outsourcing companies run 24/7/365. Handling outsourcing projects makes the turnaround time much lesser. There will be an equilibrium between time and cost. Through the expertise offered by outsourcing companies work gets finished fast and before the deadline without agreeing with less quality.
Entry into a global market
Without a doubt, you can reap the global advantage with a minimum investment. You can even provide 24/7 services in various languages. When better service is provided, there are many chances to prosper. A good service offers better opportunities to prosper.
Are you running a business who wants to keep an eye on expansion and flexible during working hours? Then go for outsourcing. With this, you will enjoy the highest output, skilled expertise who looks into every detail of your project. It is like, as you wish the product should grow the outsourcing company also takes utmost care to expand and make profits.
Focus on essentials
Most often, people opt for outsourcing their products that are out of their core competence. It passes those products to adequate expertise. Hence they can concentrate on important activities. It has its own noticeable benefit for promoting the business further. The best services thus gained through outsourcing can be used in other areas in a profitable and sensible way. Do you like to struggle with essentials that lacks competence? No right. Hence business outsourcing is the right fit for you. Through this one can eliminate the extra time and work through a ledge compared to the competitors.
One of the significant determinants determining the output of this campaign is estimating the risks and sharing it. Outsourcing a few of the processes aids in shouldering the responsibilities to the third-party vendor. Since the business vendor is a specialist, they propose your risk-mitigating determinants better.
Another important benefit of outsourcing harbour on you is the competence the business associates have in their area of specialization. For instance, A confectionery shares the responsibility of building a website and making an online presence with others. As he does not hold any experience in this regard. By outsourcing a company hires certain competencies that are in their disposal during the time frame of the contract with the service provider. This expertise ofter provides solutions to certain challenges that are out of business laymen to understand. In other words, professionals can preconceive issues as they have a wealth of experience.
Mutual understanding with external authorities on a project basically implies there is a temporary relief on one’s own staff. CEO’s of the company can freely select their partners and fulfil certain criteria. This demands for competence. Over here, one can find the right employee for the appropriate activity. The advantage also lies in accessing an immense portfolio of specialists.
Better customer service
You can potentially use your time by letting your outsourcing business to a country which has different time zones. This gives an edge of utilizing full use of 24 hours daily. Your outsourcing partner can support through back-end by continuing your job even after your office closing hours. They can finish all the complex works in your absence and mail it back. You can review it later the following day in your business hours. This even increases your year-end profits. When there is an on-time deliverable, customers will be delighted with your services. Thus outsourcing increases customer satisfaction, in turn generating trust and loyalty in customers.
Disadvantages of Outsourcing
- This is the era of data protection. It is important to protect the consumers’ data whenever you are using that. When trying to outsource the process, there is always a risk associated while outsourcing. Fear of losing all confidential and sensitive data. It is vital, to have appropriate controls in place to evade such data loss
- As you might be wondering, when you let out your work to third-party or freelancers, you are losing management control. There will be no proper monitoring and performance. As long as you trust the hirers, this shouldn’t be a huge challenge. But you have to tread diligently and carefully.
- Outsourcing business processes may often be held up expecting profits than producing quality work. That means there will be a speed of delivering the product. But this lacks standard and quality of work produced than the expected output.
- Since outsourcing businesses work with multiple clients, there may be chances of losing focus. They may not give 100% attention and time to a single company. The work assigned does not receive the concentration as it deserves. This may obviously result in inaccuracies and delays in the output.
- While outsourcing, companies should abide by the culture and other outsourcing providers. The difference in location results in cultural differences. This may make the outsourcing business to march to a different beat. As a result, this may sometimes lead to desynchronization of schedules and poor communication.
- Although it is nice to have expert advice in sharing your risks. It can be dangerous too while tieing your financials with another company. Risks of financial loss and bankruptcy are always difficult to handle. There should be clear contractual agreements. You are the person who doesn’t want to go for a financial hit if they break to deliver the product.
- Though outsourcing is extremely cheaper, you must always be careful of ripping off. There are always legal problems and hidden issues that arise if the outsourcing rules, conditions and terms are not clearly laid off. There is always a lengthy agreement which includes a plethora of fine prints. Read it carefully, if you don’t there are chances of hitting the unexpected costs.
- It is not a matter of concern, whether you are hiring talented expertise overseas or up to the street. But handing out the remote work through telephone or email, important information is lost in adaptation or translation. This could cause a serious hassle in terms of money and time.
What does the year 2019 hold in the outsourcing industry
Over the years businesses are providing solutions with cost-effective measures.
In 2019 this has gone further and seen changes in emerging technologies in the areas of
- Cloud computing
- Social media
To accelerate growth and reduce costs. In fact, as far as there are changes in technologies, this trend will continue.
25 Years before, BPO was only be termed with call centres. This notion at present is replaced with
- Web design
Coding and other tasks. Demand in these new skills is led to the reduction of prices of routine services. High competition drove businesses to invest in AI and automation.
As time passes, businesses implement more robotic automation tools and become more knowledgeable and intelligent. Nowadays, there are many outsourcing industries who are operating to add novel cognitive functionalities to robotic tools. There will be maximized awareness of embedded into the robots. This includes computer vision and NLP(Natural Language Processing).
Outsourcing industries have seen a massive boom from the past few decades. Global competition, New technologies, and innovation have led to continuous driving forces for expansion and growth in the global outsourcing industry. As this drive continues to grow, many fledgeling startups to large 500 companies are reaping the benefits getting along with the competitive world. Outsourcing is the major alternative for many companies as are contributing to the major share of their skills abroad.