What is Outsourcing?

Outsourcing can often be referred to as the process of externalising a particular value-adding activity to outside contractors.

Firms outsource because they generally cannot perform all primary and support activities at an optimum level. Most value adding activities are candidates for outsourcing. Business Process Outsourcing (BPO) is the outsourcing of business functions to independent suppliers such as:

  • Accounting
  • Payroll
  • HR functions
  • IT services
  • Customer service
  • Technical support

Back-office activities include internal business functions such as payroll and billing, whereas front-office activities include customer-related services such as marketing or technical support.

7 Magnificent Reasons to Outsource

1. Focus on Core Activities

Outsourcing can ease heavy work burdens of many companies, especially in times of rapid growth periods when back office operations of a business will also expand. Outsourcing non-core activities such as HR and financial services allows companies to remain focused on their core value-adding activities and ensures that the non-core activities do not consume company resources.

2. Cost and Efficiency Savings

Complicated back office functions can be costly in time and money. SMB’s in particular may be hindered by their size and prevented from performing a task at a consistent and reasonable cost. Outsourcing to specialists in particular activities for example B2B or B2C sales could ease this burden and also give them access to a more skilled group of workers for a specific business activity.

3. Reduced Overhead

Overhead costs of performing a particular back-office function are extremely high. Business should consider outsourcing those functions which can be moved easily e.g. telemarketing or data entry.

4. Operational Control

Operations whose costs are spiralling must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available.

5. Better level of service provided to clients

Since outsourcing is a cost effective strategy which can be adopted on every business aspect, companies can provide better services and products to their customers. With this strategy, companies can work with an outsourcing partner to provide fast and efficient delivery services which will save time and provides satisfaction to the clients. It has been widely-accepted that customers, who feel that their needs are often provided, are mostly likely to remain loyal to the company.

6. Staffing Flexibility

Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done, for example outsourcing accounts during tax season and auditing periods.

7. Continuity & Risk Management

Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing can bring continuity to the company, allowing them to keep operating while reducing the risk that a substandard level of operations would bring to the company.