Why Outsourcing can be a Good Strategic Choice for Your Business?

Why Outsourcing can be a Good Strategic Choice for Your Business?

Why Outsourcing can be a Good Strategic Choice for Your Business?

Outsourcing is the process of entrusting a company’s business process to third parties or external agencies, leveraging benefits ranging from low-cost labor, improved quality product, and service innovation. When outsourcing transgresses national boundaries and is managed by companies located in other countries, outsourcing takes the form of offshoring.

A report of the homeland security of USA claimed that even after the president Donald Trump’s promise to bring back all the outsource business and operations back to America, the rate of outsourcing keep increasing from 2017. The market size of global outsourcing is stable. Many companies, from startups to big corporations outsource the business operation at different scales.

But why companies outsource some of their business processes? The result lies in the corporate strategy of any organization. Back in the ’80s and ’90s organizations generally outsourced business processes those did not generally create knowledge for the organization. But later organizations realized that the outsourcing operations can create valuable knowledge in a cost-effective way. Hence, organizations started to outsource knowledge operations like R&D to achieve the ownership, location, internationalization, and technological advantages.

In recent times many SMEs and large corporations from both developing and emerging nations were noticed to outsource some of the business processes to their offshore partners. Generally, small companies outsource business processes like content marketing, book keeping , payroll management, conversation optimization and highly repetitive administrative & customer service works like moderation, tagging, categorizing etc. In contrary large corporations outsource mainly to minimizing costs, and gaining cheaper access to technologies, knowledge, and expertise. In 2018, top outsourcing trends were-

  • Cloud Computing;
  • Information and Data Security;
  • Artificial Intelligence and Robotic Process Automation;
  • Building Platforms that Support Cryptocurrencies;
  • Developing Automation Technologies;
  • Digital Transformation of Traditional Communication;
  • Rise in Freelance and Independent Outsourcing Services; and
  • Transitions to Efficient Vendor Management.

Administrative Services Outsourcing

The decision of outsourcing some portions of the business processes lies in the corporate strategy. If the cost of creating, operating and managing some business processes in-house is lower than engaging in other in-house business operations or any development projects, then the organization should definitely outsource those business processes to the outsourcing business partner. Many BPO firms are now notably trained to provide some specialized services in an effective and efficient way, thus outsourcing partners can ensure the effective business process solutions in a cost-efficient way. The following section illustrates some benefits of administrative services outsourcing

Many companies outsource some business processes in controlling capital costs. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in the business. It also allows an organization to avoid large expenditures in the early stages of the business. Outsourcing can also make a firm more attractive to investors since outsourcing enables a company to pump more capital directly into revenue-producing activities.

Outsourcing allows a firm to reduce operational costs. The cost of labor is generally higher in the country where the parent company is located. Thus, companies usually outsource the business processes to a location where the cost of skilled labor is relatively lower. For example, through outsourcing a company can get the service of a highly skilled machine learning engineer by paying only a pint of an in-house engineers’ wage.

Outsourcing allows an organization to explore more opportunities. The outsourcing firm can start a new project quicker than the same capacity firm who opts not to outsource any business process. As outsourcing business processes to a reputable third-party provider can ensure the quality of the outsourced projects, the parent company can easily deploy the resources to any other business functions or developing projects which may generate more profits and opportunities in a long run.

Outsourcing allows an organization to start any project quickly. To start and run a new project a firm firstly needs to hire the right people, train them, and provide the support they need. These processes are time-consuming and often extract a lot of resources and capitals. Outsourcing new projects to any specialist BPO firm enables a parent company to start the projects quickly.

Outsourcing allows the parent company to focus on core business. Every business has limited resources, and every manager has limited time and attention. Outsourcing can help a business to shift its focus from peripheral activities toward work that serves the customer, and it can help managers set their priorities more clearly.

Increase in Efficiency. Research shows companies that do everything themselves have much higher R&D, marketing, and distribution expenses than a company that outsources business processes to an outside provider. An outside providers’ cost structure and economy of scale can give your firm an important competitive advantage.

Risk Reduction. Every business investment carries a certain amount of risk. Markets, competitions, government regulations, financial conditions, and technologies all change very quickly. Many Outsourcing providers assume and manage these risks for the parent company and offer services like risk management, predictive analysis and various other business solutions.

Outsourcing helps to create the level playing field between small and large corporations. Most small firms simply can’t afford to match the in-house support services that larger companies maintain. Outsourcing can help small firms to act “big” by giving them access to the same economies of scale, efficiency, and expertise that large companies enjoy. bottom line

Outsourcing allows a parent company to re-engineer their in-house business processes which allows the company to become more agile, customer-focused, efficient, resilient and sustainable.

Some companies also outsource to expand and gain access to new market areas, by taking the point of production or service delivery closer to their end users.

To recapitulate about outsourcing as a good strategic choice, companies undertake outsourcing and off-shoring for a variety of reasons depending upon their vision and purpose of the exercise. While this may vary from company to company, the fruits of labor are visible among some of the leading enterprises worldwide, wherein outsourcing and off-shoring have become a core component of day to day business strategies.

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