When a company contracts the service of another company or provider to perform some business functions outside of its business premises, the process is known as outsourcing. While the outsourced task can be performed in-house, there are different reasons why a company chooses to outsource a business function over performing it in-house. Some of the reasons include reduced cost of running business (especially labor cost), access to improved expertise and technology, reduced market entry time and so on.
A good number of the large companies and corporations leverage outsourcing extensively. And, some of the popularly outsourced tasks include email marketing, call centers/customer care, payroll, telemarketing, social media marketing, and even some aspects of manufacturing. Usually, the tasks are outsourced to providers who are specialized in the task in question. A good number of oversea destinations such as China, India, and Philippines are popular outsourcing destinations.
As mentioned earlier, there are many reasons why companies choose to outsource certain functions instead of handling them in-house. However, the most pronounced reason and benefit for outsourcing is cost saving. The cost saving benefit comes from the elimination of overhead costs and minimal labor cost, which constitute major costs for almost every company.
Also, when a company chooses to outsource, it helps to facilitate focus on other essential aspects of the business linked to its real existence. The in-house personnel are able to focus on more pressing matters and eliminate multi-tasking substantially when some tasks are contracted out to a third party.
The best part is that specialized outsourcing companies are often streamlined and usually possess world-class skills and capabilities, plus access to the most up-to-date technology that a business or company may not be able to afford internally.
In addition, when a company is seeking to expand, the most cost-effective way to achieve the feat is outsourcing. Whether it is in terms of labor cost, availability of relevant technology, access to expertise, shared risk or other aspects of business expansion, outsourcing is definitely a great option to adopt. However, in order to enjoy all these privileges that come with outsourcing, you must follow due diligence in seeking out the right provider.
How to Manage Outsourcing Concerns
No doubts, outsourcing comes with loads of benefits. However, certain issues may arise when outsourcing is involved. For instance, direct communication between a company and its customers is eliminated, which in turn may hamper company-customer relationship.
However, solution for this likely drawback can be provided for by ensuring that the outsourcing provider replicates the company’s standard in dealing with their customers. This way, customers will feel as though the company itself is attending to them. Also, daily or weekly feedback may be necessary to monitor things.
Daven Michaels is a New York Times Best Selling Author and CEO of premiere global outsourcing company, 123Employee. The company employs hundreds of young bright individuals on three continents. His International event, Beyond Marketing Live! inspires entrepreneurs build & grow their business with revolutionary new theories and systems allowing them to design the business and personal lifestyle of their dreams.
1 thought on “Outsourcing: How Does It Really Work?”
I agree with you Daven Michaels, Outsourcing companies not only practices its profession but it also values the core of work ethic of every employee. This is needed to have a better connection between two companies. With the good connection, it may double its productivity.