The history of outsourcing can hardly be traced though there are some scholarly articles which claim that it begun during the early 19th century. However, our aim in today’s article is not to dig deeper into its historical background or even analyse why outsourcing is still existing and gaining more popularity than ever. So to pave the way for our discussion, we’ll likely limit it to the salient reasons why companies opt to outsourcing and how it affects their business strategy.
Depending on whose view point you’re looking at, outsourcing generates two opposing effects on business as well as the country’s economy where the business is situated. Business owners are mostly on the advantageous side of the coin as outsourcing help entrepreneurs considerably cut costs, control capital allotment, increase efficiency, reduce labor costs, start new projects quickly, focus on core business, compete competitively with other business and reduce risks.
On the other side, the economy of the country where the business is located is inversely affected as outsourcing employs workers from other countries like Philippines and India. The supposedly solution to local unemployment was hindered by outsourcing however businesses cannot be blame to do outsourcing as it greatly help them reduced costs without sacrificing the quality of their services.
Since we’re talking more of the business side here, let’s leave our country’s economic growth strategies to our political leaders and economists because in a way or two, we’re also providing them help to achieve this goal through taxes and employment. So now, let’s dig deeper as to how really outsourcing affects your business strategy. Below are some great reasons why you should turn your business to outsourcing too.
Outsourcing Minimizes Operational Costs
Wish you could cut your operational costs especially during economic decline? Outsourcing can significantly help you realize cost reduction through efficient internal processes and reduced labor-related costs. With outsourcing, you are able to minimize the costs incurred in the process of hiring, training and retaining of employees. Outsourcing lets you focus your human resources where you need them most.
Efficient internal processes combined with reduced costs of labor helps you generate savings for up to 40% which helps you maximize your profits during economic prosperity and mitigate loses during economic decline.
It Allows You to Contain Investment Costs
Cutting cost may not be the sole reason to outsource, but it's definitely a major factor. Outsourcing aid in converting your fixed costs into variable costs allowing you to invest your capital elsewhere in the business and helps you avoid huge expenditures during the start-up of your business. Another bright side of outsourcing is that it makes your firm more attractive to investors as you can allot more capital directly into revenue-producing activities. For instance you need a warehouse near a port facility and acquiring land and constructing your own warehouse will require a huge amount of capital investment. So what better option you have is to outsource your warehousing and storage functions to overcome the impact of recessionary sales by redirecting your business capital towards more-liquid activities. The reduction on expenditures on in-house capital investments also lowers your breakeven point or the point where you have neither a profit nor a loss in your sales.
Outsourcing Helps You Mitigate Business Risks
We are taught about taking risks on a calculated basis and nevertheless, every business investment we do carries a certain amount of risks from market, competition, government regulations, financial conditions and technologies which are all changing very quickly. Outsourcing providers assume and manage these risks for you and mind you that they are generally much better in decision making on how to mitigate risks in their areas of expertise.
The need for outsourced service provider is very evident specially during business recession as it does not only provides you the opportunity to transfer business risks to your provider but it also helps you cope up with changes without sacrificing the quality of your service and products at all. You stay at your competitive advantage even at recession times like this.
Outsourcing Helps You Focus on Your Core Business
We are all aware that our business resources are scarce and that as business owners/managers, we have to be resourceful. Whether we admit it or not, we have to divide our time and attention to the different aspects of our business however, outsourcing can help us shift our business focus from peripheral activities to serving our customers better and profiting more from our investments. Given that your workloads are lessen as it is now taken care of by your outsourced service provider, you will now be able to have a clear focus on what is more relevant to your business and sets out your priorities clearly towards achieving your ultimate goals.
It Increase Your Competitive Advantage
Outsourcing gives your business fair access to the economies of scale, efficiency and expertise that huge companies are enjoying. Since an outside provider’s cost structure and economy of scale can give your firm a competitive advantage without the need of investing more capital on research, development, marketing and distribution expenses, you have now an edge over your competitors no matter how large their scale may be.
It Enables You to Start New Projects Quickly
Look for a good outsourcing firm which has all the resources you need to start a project immediately. This will shorten the time frame you will need to hire the right people for the project providing them essential trainings and giving them the support they need to fully function for the said project. Your start-up process can be even more difficult if your project requires major capital investment on fixed assets however outsourcing can lit up the way and make things a lot easier for your business.
How Can We Help You More?
Now that you are acquainted on how outsourcing help businesses grow and reduced costs, are you ready to make outsourcing as your next business strategy? We’re here to help!
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Ooh! There's more than having a regular employee in an office, now I know what will I do in my start up business. Thanks!
ReplyDeleteI agree with ms Natalie. This article is insightful and clear!
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