Outsourcing is one of the buzzwords featuring in many enterprises today. From its rising popularity, it almost seems like business owners can simply outsource any duties they are unwilling to handle themselves. However, entrepreneurs should know that outsourcing does not provide an easy way out of dealing with their businesses on a day-to-day basis. Before taking the outsourcing path it is important to understand what duties to outsource and how this action will have a positive impact on the business.
Simply put, outsourcing can be defined as a business strategy where an organization delegates some of its major duties and functions to specialized third parties or external agencies. This may involve contracting an individual or another organization, such as an umbrella company, to perform some of the parent corporation’s business processes.
The common tasks that are best outsourced fall under these categories:
- Highly repetitive tasks. These can include functions such as shipping inventory and data entry.
- Tasks that require specialized knowledge or skills. These can include bookkeeping, financial advice and IT support, among others. These duties can be outsourced to skilled individuals without hiring them on a full-time or permanent basis.
Most small business owners mistakenly assume that outsourcing is only for big companies. This is not true, as any organization, regardless of its size, can benefit from implementing this strategy.
Benefits of outsourcing
Entrepreneurs who choose to outsource some of their business functions stand to enjoy several benefits, including:
- Incurring lower operational and labor costs. If done correctly, outsourcing has the potential to assist businesses to realize significant savings. Companies can get their tasks done at a cheaper price leading to great savings in operational costs.
- Focusing more on their company’s core competencies. Delegating time consuming or mundane tasks to other service providers allows entrepreneurs to concentrate more on what they are paid to do.
- Freeing up some valuable internal resources. This benefit of outsourcing permits business owners to redirect their internal resources towards business growth and expansion.
- Tapping into a different knowledge and resource base. Outsourcing functions to other individuals or organizations means that entrepreneurs can make use of novel ideas and resources that were previously unavailable, allowing them to compete more effectively.
- Ability to upsize or downsize their staff at will. Most companies fear downsizing their permanent staff in case this leaves them open to costly lawsuits. Outsourcing some of their major functions to external agencies allows them to control the size of their new staff or contractors.
A cost-effective option
The recent advancements in technology mean that any company can take advantage of the benefits offered by outsourcing to streamline their business processes while increasing profits at the same time. Businesses that outsource some of their duties usually record improved performances since they are not stranded with internal resource crunches and are not bogged down with tedious tasks.
Outsourcing also offers faster turnaround times compared to carrying out some functions in-house. This means that companies can get all their duties done in a shorter period, invariably leading to saved time and money in the long run.