Discussing the question of “why do companies outsource?” is not met with as much fury or apprehension as it was two decades ago. People today understand that outsourcing is a great way for businesses to launch, move quickly, and find success.
In the following article, we’ll be exploring 10 of the reasons companies and their employees are no longer afraid of outsourcing. Today, they embrace it for its benefits and it’s certainly a factor to consider for startups.
That said, there are certain roadblocks that can still prevent effective outsourcing.
Before getting to the benefits, let’s explore the three main ones
Poor Communication With Team Members
As a company, your own inability to communicate with team members can make outsourcing difficult. Staff needs to be assured of their value and position with the company or else rumors may start to fly and erode morale.
Employees who understand the reasons for your decision, as well as their place within the organization, are likely to be supportive. Don’t leave them in the dark.
Incomplete Market Research
Sometimes outsourcing can be bumpier than expected because you don’t do enough homework when making the decision. You end up going with the first company that says they can handle all your tasks for you instead of properly vetting.
You also start outsourcing with an incomplete idea of what is beneficial for outsourcing and what is better handled in-house. Don’t short-change yourself by gliding over the market research process.
Penny Pinching
The holdup to effectively outsource often occurs because you think the task is so simple that you should be able to handle it more efficiently. However, this mistaken belief that you can “do it best just because you can do it” could be holding you back when you consider the efficiencies you pick up in other areas.
In the next section, we’ll be talking more in-depth about what those efficiencies are.
Let’s continue with the benefits
1. Outsourcing Cuts Costs
The first argument in favor of why to outsource is that it can significantly cut costs. It does this in two specific ways.
The first is labor. You have to pay your employees something for them to be willing to work for you. Laws dictate that, in addition to a salary or wage, you also have to pay for half their Social Security and Medicaid costs.
The second is operations. Depending on what you’re outsourcing, this could mean a reduction in supplies, materials, or workspace.
2. Allows Better Focus
Another of the reasons to outsource is that doing so allows you to put the focus on where it matters the most. In more specific terms, you can spend more time focused on your core business model and less on administrative and menial tasks.
3. Expands Points of View and Resources
A third of the reasons for outsourcing is that doing so allows you access to an additional knowledgebase, possibly one on a global scale. In other words, companies operating in geographic locations with shortages of certain talents and skills can still get access to the expertise they need as well as alternative points of view by seeking the needed help elsewhere.
4. Redirects Resources More Effectively
A viable response to the question of “why outsource?” is that it can help you redirect your existing resources in a way where they are more effectively utilized. Putting it in terms of human capital, wouldn’t you rather your customer service expert be dealing with customers 100 percent of the time instead of splitting their time on a talent they don’t have?
5. Maximizes Profits
Another reason why outsourcing is good for businesses is that, in addition to reducing costs, it also helps to maximize profits. Profits are how you build a business, grow it, and produce more meaningful jobs.
Of course, the way it increases profits is two-fold. Firstly, it increases the profit margin itself (that is, the gap between revenue and expenses). Secondly, it enables a business owner to move their business more aggressively into its most profitable areas of commerce.
6. Reduces Tedium
The less you have in your care as a business owner, the less you have to worry about compliance-related tedium that usually takes the form of taxes and regulations. That burden falls to whomever your vendor is.
An IT company, for example, would take on any legwork that goes with the service they are providing you. Furthermore, it helps reduce your tax burden in a way that hiring an employee for the same job never could.
7. Lowers Risk
The fewer plates you have spinning in the air, the less risk you have of dropping one. Business tasks are the same way. The more you’re capable of farming out to a competent vendor, the more you can rest easy about the outcome.
8. Opens Up New Markets
We’ve already mentioned that outsourcing allows you to focus more on your core business model. One remarkable thing that will happen when that occurs is that you will be introduced to new opportunities the further down you drill into your industry.
Apple was able to do this as it grew its desktop computer business. You may not be destined to be the next Apple, but you can find these new opportunities as your business evolves.
9. Boosts Customer Service
What matters more than customers? They are the ones who keep the revenue coming in and the profits soaring. You want to serve them as best as you can.
Getting to focus on your core business model means you are able to deliver products and services that add value to your customers’ lives. It also means you’re freed up to handle any issues that arise along the way.
10. Provides More Peace of Mind
There is peace knowing that you have outside help. That peace is even stronger when you know the outside help specializes in what you’re hiring them to do and that your talents are entirely focused on what you do well. As soon as you get a system in place, stress melts away.
Learning “Why Do Companies Outsource?” Will Open Doors for Your Business
Once you’ve discovered the answers behind the question of why do companies outsource, it’s easy to see how it can enhance your business. Best of luck as you consider this option. For more small business advice and tips, check out some of our additional posts!
