The Benefits of Outsourcing

The most recent buzzword in the world of business is "outsourcing".  As more and more businesses all over the world looking to save money but still offer high quality are turning to destinations such as India for transferring their support functions.

So what exactly is outsourcing and what are the benefits of shipping your non-core business functions offshore.

What is outsourcing?

A common modern practice of modern society is to outsource business support functions such as finance, information technology and human resources.  Outsourcing in its simplest form is to contract a function of business to a third party.  The function ceases to exist internally and often so does the ownership.

Functions to be outsourced is not limited and over the past few decade companies have contracted out everything from mopping floors to internet security.  Companies spend an average of £100 billion on outsourcing a year.

The decision to outsource can be a difficult one, as a company evaluates options available as well as the pro's and con's of each.  The advantages and disadvantages are not going to be the same for every company.

Benefits of outsourcing your support functions?

There are many benefits of outsourcing and just some of the advantages of outsourcing are discussed in more detail below:

1. Cost Saving

Outsourcing has its foot firmly wedged in the door as a cost saver.  This may be the main benefit and the benefit that springs to everyone's mind, and therefore  most often the main reason many companies choose to outsource their functions.

Due to the difference in wage in India means that jobs can be completed at a significant reduction to western countries while having no effect on quality.  The quality of the services provided in India is extremely high ensuring that low cost does not mean low quality.  By outsourcing to India a company can make savings of up to 60%.

2. Access to skills and resources

There is no need to spend a large amount of time recruiting a skilled team in house when the skills and resources are readily available elsewhere.  A company can spend excessive time sourcing a team which is taking needed time away from serving customers needs and expectations.  There is a pool of highly skilled resourced waiting around the world to serve a company's needs.

3. Time Zone

Apart from the obvious cost advantage of outsourcing to India as previously discussed, the other big advantage why more and more companies are looking to outsourcing is the time zone.  When the company has closed for the day and in the land of nod, another company around the world is working on delivering a company's needs.  So when morning comes  a company can have satisfaction that  business is complete.

4. Focus on core areas

Freeing up time on outsourcing certain business functions allows energy to be invested on building brand loyalty and invest in research and development to produce new products and services. 

The main focus whether outsourcing is chosen or not is on ensuring customers receive the best quality in both, goods and in service.

This is a guest post by Louise from Business Recovery who offer a range of business turnaround solutions.

Comments

Balanced report ..

JC | | Permalink

See - Benefits of outsourcing your support functions?

Don't see - Possible downside of outsourcing your support functions

So all upside then and no possible downside - mmmmm .....

A sold story with difference

sandy.nippondat... | | Permalink

OUTSOURCING is a sold story and not any more new buzzword. This industry is full of cowboys and finding right partner is biggest issue . I have seen downside of this if careful approach is not followed and trust me this is not off the shelf service and both parties needs to work hard to make it a successes. Most probable issues one can face are

Language and cultural issues

Inconsistent quality of delivery (large attrition in developing economies)

Domain experience (people claim but don’t have that)

No standard processes  (know it all approach by service provider is deadly)

Success of outsourcing largely depends on how do you perceive the benefits. If you are looking for short term , then this is not something you should look for . Outsourcing is a success with large groups because they invest in planning and execution of process and their analysis of saving is based on 3-5 years overall benefits . Small businesses don’t have that sort of window and without experience in managing outsourcing, there are huge chances of failures.

AlwaysonBooks's picture

Many small outsources have a

AlwaysonBooks | | Permalink

Many small outsources have a high turn over rate, I hear the stories that the first few jobs where fantastic, then it just stopped. The big players in this market charge more, the small players try to do everything and fail. You need to partnership with some one who is focused not one that says they can do anything.

And what companies are "spend an average of £100 billion on outsourcing a year"

Outsourcing is no longer a

VishalK | | Permalink

Outsourcing is no longer a new business strategy. It's business as usual. From what I see and hear on the web people mostly blame the outsourcing service provider for the failure of the outsourcing relationship. However an outsourcing relationship can fail due to a client's non-involvement too...I have covered the reason why outsourcing can go wrong in my blog at blog.qxltd.com .

@Sandy you are spot on when you say that the benefits of outsourcing are not visible immediately, but the window that you speak of (3-5 years) is a little far-fetched. I have been in the outsourcing business for as long as I can remember and can say that the benefits become visible in around 6-8 months.

@AlwaysonBooks I have covered the issue you present, about small players acting as the jack-of-all-trades, mr-know-all's in my latest blog post - http://blog.qxltd.com/2012/05/when-outsourcing-goes-wrong-top-3.html

Thanks!

 
 

@sandy

VishalK | | Permalink

@ Sandy  - my latest blog post does cover the issues that client usually face - about language and cultural issues, the quality of delivery and how new vendors don't have defined processes in place due to an immature business. please have a look at When Outsourcing Goes Wrong - Top 3 Reasons!

outsourcing

mirabete | | Permalink

Might be that the result of outsourcing is visible. Problem is, there are people and countries affected due to this business. Can't blame them if they feel bad about other outsourced countries. One of them is Philippine Outsourcing.

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