What Is Outsourcing?

Outsourcing is the business practice of contracting with an outside party to take care of certain tasks instead of hiring new employees or assigning those tasks to existing staff. It’s a popular way for businesses to lower operational costs and streamline operations while still handling important functions.

Outsourced tasks may be occasional, such as hiring an accountant to do your taxes once a year. They may also be a regular part of business operations, such as contracting with a cleaning firm rather than hiring janitors as employees.

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The Advantages of Outsourcing

Focus on Core Activities

Outsourcing important but mundane activities can allow you to refocus your in-house resources on the activities that make you profitable without sacrificing quality or service.

For example, let’s say your company lands a large contract that will significantly increase the volume of purchasing in a short period of time. By outsourcing purchasing responsibilities, you free up personnel to focus on the contract itself.

Maintain Lower Costs

Sometimes the expense of purchasing equipment or needing a new location can be prohibitive. In these cases, it’s more cost-effective to outsource than to expand operations internally.

If the growth of your business results in an increased need for office space, try outsourcing simple operations such as telemarketing or data entry rather than moving to a new location. It might cost far less than the price of expanding, and it is both more efficient and less expensive than relocating.

Maintain Operational Control

Operations with rising costs should be considered for outsourcing. Departments that might have evolved over time into uncontrolled and poorly managed areas are good candidates. An outsourcing company can often bring better management skills to your company than what would otherwise be available without significant restructuring.

Offer Staffing Flexibility

Outsourcing allows operations or departments that have cyclical demands to bring in additional resources when they’re necessary. The outsourcing company can then be released when things slow down again, maintaining a company’s flexibility.

Provide Continuity and Risk Management

Periods of high employee turnover can add uncertainty and inconsistency to a business. Outsourcing provides a level of continuity to the company while reducing the risk that a substandard level of operation could bring, even over a short period of time.

Develop Internal Staff

A large project can require skills that your staff does not possess. On-site outsourcing, where you bring in contractors to operate at your own location, can provide you with the people who possess the skills you need while your people work beside them to acquire a new skill set.

How to Get the Most from Outsourcing

Businesses often think about outsourcing purely in terms of cost savings, but outsourcing can do more than just lower expenses. As your business grows, outsourcing can be a way to promote innovation, disrupt your industry, and access new skill sets that reposition your company in the market.

When considering how outsourcing can help you grow, don’t limit yourself to looking at the cost of hiring outside contractors versus handling a task with your current staff. Focus on the value a contractor’s expertise adds to your company. Whether through expanding production, marketing your company more extensively, or disrupting the way your industry does business, outsourcing can provide an opportunity for you to innovate, grow, and rise above the competition.