Although there is plenty of controversy surrounding outsourcing these days, it is not something that can be ignored. The fact of the matter remains: the biggest, most successful companies have increased their outsourced activities at huge rates in recent years. This is for one good reason: outsourcing is extremely beneficial for companies.
Companies like General Electric and Caterpillar have increased their outsourced business by more than a third while their U.S. activities only grew at a fraction of the rate. The path is simple: companies realize that sending a large portion of their work overseas is doing wonders for their bottom line. The same can be true for yours!
True savings of outsourcing
Technically speaking, outsourcing can apply to a wide variety of things. Even if your company is not currently outsourcing any work, you likely still have outsourced multiple times without even realizing it. It isn’t always work done abroad (although that is the current trend), but it can mean contracting with someone outside of your company to provide a service you or your company usually provides. These services can include cleaning services, IT services, bookkeeping, or pretty much anything else. Your family is technically outsourcing when a contractor is hired to fix your sink, repair your car, or renovate the house.
The reason outsourcing is such a good thing for the person hiring is that it usually comes at a comparatively lower cost, especially considering the contractor’s efficiency and expertise. If you needed to fix your own sink, for example, it may be cheaper in dollars but it won’t be done as well (unless you’re already an expert). Plus, it will take more of your own precious time. So in that way it costs more.
When a company outsources (sometimes called “off-shoring”) to a different country, they are doing more than simply getting ahead on the quality side of things. They are also saving their company money because the working wage is much lower in many countries. This means higher quality for a lower price, and probably in a shorter amount of time as well. In other words, your company will get more bang for its buck. This is called the comparative advantage.
List of advantages
If you’re still not convinced, here is a list of reasons why your company should consider outsourcing.
- Time-consuming, non-core functions can be easily and reliably outsourced, saving you and your employees time to focus on the ‘real’ workings of your business.
- It can expand your company’s horizons by having increased global knowledge and resources.
- It allows more resources to be freed up internally, making them available for other purposes. For example, the money and time it would take to train people for a specific administrative or technical task can be sent abroad, which saves you time, effort, and capital.
- More bang for your buck. Your company will get higher quality results at a lower cost.
- The sun never sets on your business. Because of time zones, work will be getting done overnight, so you can wake up to everything having been done while you slept.
- Outsourcing helps with risk mitigation — expanded resources and external workers means a wider safety net.
- Increased market access can be gained by outsourcing to new geographical areas.
- There is a better quality of service. You can focus on the aspects you do best, instead of getting bogged down with administrative issues, payroll processing, IT assistance, and so on. Your business can grow to its full potential.
As you can see, there are plenty of reasons to outsource, although the most important reasons will differ from company to company. Many companies don’t outsource until they feel they ‘have’ to. Get ahead of the game by contacting Sidago. We can help you find the best outsourcing opportunities for your business.