Outsourcing, is a business practice used by companies to reduce costs or improve efficiency by shifting tasks, operations, jobs or processes to an external contracted third party for a significant period of time. Small companies usually use outsourcing to cover their payroll, accounting and other important functions as often they have no other choice.
However, most companies don’t understand the benefits of outsourcing. Not only does outsourcing cut costs, but outsourcing can provide a number of long-term benefits.
The idea of cost cutting may be one of the biggest advantages of outsourcing, as it converts fixed costs into variable costs. Thus, releasing capital that can be invested in another area of your business. Outsourcing will also result in your company being more attractive to investors, since you are able to allocate capital directly into revenue producing activities.
Companies who do everything by themselves have much higher marketing, distribution and research and development costs, which result in theses being added onto your customers. By outsourcing these functions, you can ensure that you integrate their cost structure and economy of scale which will give your company vital competitive advantage.
Another area is reducing labour costs, as it can be expensive to hire and train staff; who can sometimes not live up to your expectations. Outsourcing ensures that you focus your resources where they will benefit the company. By also having an outsourcing firm you can start projects quickly, knowing that they have the experience to deliver high quality work. Whereas, if you were to do this in-house you would have to hire, train and provide support to new employees.
Instead of wasting time on peripheral activities due to limited resources; outsourcing gives you the freedom to focus on work that serves the customers. This is helpful as most small-medium sized enterprises have limited resources and should focus on the work for their clients or be working to secure new clients.
Smaller companies cannot afford to compete with the in-house support that larger companies can maintain. Outsourcing can help smaller companies to compete with larger companies as you would gain access to the same economies of scale, efficiency and expertise that a larger company has.
Finally, reducing risk is a huge benefit that outsourcing gives; as every company has a certain amount of risk. The economy, markets, competitions, regulations and technologies are ever-changing. Outsourcing providers manage this risk for you and they are usually better at avoiding risk.
If you would like help around outsourcing or how outsourcing could benefit your company, drop us an email at firstname.lastname@example.org – we’d love to hear from you.
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