Benefits of Outsourcing
What is outsourcing?
Outsourcing is the contracting out of a business process to a third party. It sometimes involves transferring employees and assets from one firm to another, but not always. Outsourcing is also used to describe the practice of handing over control of public services to for- profit organizations. Outsourcing includes both foreign and domestic contracting and sometimes includes off shoring or relocating a business function to another country. Financial savings from lower international labour rates is a major motivation for outsourcing.
The benefits of outsourcing
There are many benefits of outsourcing that companies need to understand in order for them to take most advantage of the practice.
- Reduced costs of infrastructure and labour are a major benefit. Hiring and training staff, investing in infrastructure is quite expensive but with outsourcing you save your company all the burdens of manpower and infrastructure. A company does not have to pay additional benefits to their employees hence a lot of money is saved
- Outsourcing saves you a lot in terms of time, effort and costs.
- There is the benefit of cost advantage. The same services are provided by another company at the same quality but lower costs hence a company gets increased savings form outsourcing.
- Access to specialized services since outsourcing allows you to hire experts and experienced people who specialize in the particular business process. This encourages provision of better services than you and your existing manpower could have provided.
- Faster deliveries and improved customer satisfaction hence saves a lot of time and promotes customer trust and loyalty.
- Outsourcing allows you to focus on the core of the business without compromising other processes hence there is increased productivity and efficiency. Companies that handle everything in house spend more on research, marketing and other development processes.
- Continuity and risk management is a major benefit of outsourcing. High employee turnover will add uncertainty and inconsistency to the company operations hence outsourcing provides a level of continuity to the company.
- Competitive edge for your business since it enables even small companies to enjoy the same efficiency and expertise that large companies enjoy.
Precautionary measures for outsourcing
Despite the many benefits of outsourcing in a firm, there are also different demerits that companies have to be aware of. It is very risky to outsource certain services because a company can expose itself to security risks. Confidential data can be leaked especially if the company outsources human resources services which deal with payroll and recruitment procedures.
Companies can also hire substandard services and laborers and still spend so much money. This will not be cost effective for the companies involved. It is necessary for companies to take appropriate measures to precautionary measures in order to avoid all these issues. These may include taking the following measures:
- Carrying out thorough research on the firms to be hired.
- Being vigilant on services being offered
- Signing a foolproof contract that protects the company information and employees from exposure.
By taking these measures, a company will be better off as it will choose the best outsourcing services hence benefit fully from outsourcing.