About outsourcing

“Do what you do best and outsource the rest” has become an internationally recognized business sentence for a simple internal business functions that needs to be transferred. 

Simply put: contracting of the operations and responsibilities of a specific business process to a third-party service provider. That would mean that the two organizations can enter into a contractual agreement involving an exchange of services and payments.

For enterprises, it becomes the handiest thing to do because outsourcing gives you the possibility to free your company from overall payment. Basically, you are paying only the service that you need and when you need them. And your human resources, of course. They are relieved of tasks for which they are not highly specialized.  It gives you space to master your strengths by outsourcing your “weaknesses”.

Thinking about it, with outsourcing some parts of your business, your budget will not become poorer. It will actually make it richer. It saves your money on so many levels. The important thing is that there are no limitations. If you need some service that can be done and done online, over email, internet. There is no clear reason why you should not “hire” some company that is an ocean away from yours. If it is cheaper and better at what they do. 

Just to be clear on some parts of this what we said here. 

Nobody is telling that you, as a successful company, shouldn’t invest in your people. As a matter of fact, you exist and are successful because you provide them the possibility to learn and progress in the sphere that is their core business in daily basis.  Outsourcing some of their daily/monthly activities is not costing you double.  Simple, the “outsourced job” is cheaper, done faster and accurately in specialized company and your employee has the time for his daily/monthly tasks. 

“Train your people well enough so they can leave, treat them well enough so they don't want to” once said by Richard Branson.

 It gives you some thought to your head doesn’t it?

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Definition of outsourcing

Outsourcing is a practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.

Outsourcing is an effective cost-saving strategy when used properly. It is sometimes more affordable to purchase a good from companies with than it is to produce the good internally.

An example of a manufacturing company outsourcing is Dell buying some of its computer components from another manufacturer to save on production costs. Alternatively, businesses may decide to outsource bookkeeping duties to independent accounting firms, as it may be cheaper than retaining an in-house accountant.

In addition to cost savings, companies can employ an outsourcing strategy to focus on core aspects of a business. Outsourcing noncore activities can improve efficiency, streamlining and productivity because another entity performs these smaller tasks better than the firm itself. This strategy may also lead to faster turnaround times, increased competitiveness within an industry and the cutting of overall operational costs. Businesses can reduce labor costs significantly by outsourcing certain tasks, while companies may simultaneously have access to technology without investing large amounts of money to own the technology.

Many businesses find outsourcing the functions of human resources, such as payroll and health insurance, saves enormous amounts of time, effort and energy. HR is one of the noncore functions of a firm; other companies may have experts to help with this aspect of human capital. As many as 16% of companies outsource some kind of task that deals directly with human resources.

Outsourcing also has several disadvantages. Signing contracts with other companies may take time and extra effort from a firm's legal team. Security threats occur if another party has access to a company's confidential information and then the party suffers a data breach. A lack of communication between the company and the outsourced provider may occur, which could delay the completion of projects.

 

Companies typically save around 15% due to cost reductions brought about from outsourcing. A 2014 study from Datamark, Inc. claims one client saved 31% over one year when outsourcing one aspect of its business process. Over three years, the cost savings rose to 33%.

Deloitte's 2014 global outsourcing survey interviewed respondents from over 22 industry sectors and 30 countries. The consulting firm found 69% of companies surveyed were more likely to outsource in some way due to cloud computing technology. As much as 66% of companies wanted to outsource certain business processes as a service. Up to 53% of survey respondents outsourced their IT functions in 2014, while 26% of firms that did not outsource anything at the time planned to do so sometime in the future.

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