Why do companies outsource? 6 key benefits for business owners

Love it or hate it, outsourcing work to a third party presents obvious benefits for businesses. So if you’re wondering why companies outsource a specific element of their activity, the following article paints the picture.

Often a business owner may think they can do it all, especially founders of small businesses and taking such a standpoint can literally make or break a company’s growth potential.

For those that recognise that there are only so many hours in a day, it stands to reason that outsourcing should be viewed as a bread-and-butter strategy for businesses today.


What do the numbers on outsourcing reveal?


According to Microsourcing.com, the progress of technology has given businesses a monumental edge when it comes to remote workers. This has increased the offshore outsourcing industry astronomically in nearly every category.

Respondents to a survey from Microsourcing gave the following as reasons for outsourcing:

  • 59 percent said it was cost-cutting tool
  • 57 percent said it enables them to focus more on their core business
  • 47 percent said it helps to solve capacity issues
  • 31 percent said outsourcing enhances their quality of service
  • 28 percent described it as critical to business needs
  • 17 percent said outsourcing is used to manage the business environment
  • 17 percent indicated it drives broader transformational change

Further studies disclose, as reported by the site, that for every four jobs forfeited another automaton management position is created. What’s more, outsourcing of higher level positions is on the increase.

Adding to the trend are innovative software alternatives that provide superior time-tracking features. These features effortlessly bestow businesses with a hands-on approach even when miles away.


6 key benefits of outsourcing for businesses in a nutshell


1. It delivers a competitive edge

This advantage applies particularly to small business owners.

With the help of a remote working techniques, in-house and outsourced roles can be brought together though they may be scattered across different cities, states, or countries. When managed well, this allows a small organisation the same level of access to talent as a much larger one.

2. It helps businesses manage capital expenditures

Instead of paying a fixed monthly wage to a full-time worker, outsourcing offers a business the benefit of spending only where and when needed, thereby leveraging more control over business assets. The added revenue stockpile can be directed towards marketing or investing in supplementary services.

Research has also shown outsourcing is particularly cost effective for small business owners as they are relieved of the need to pay operating costs associated with worker’s compensation schemes, health insurance, payroll taxes, and office space (although you’ll want to ensure you’re complying with the letter of the law for your region).

3. Outsourcing frees up capacity for increased undertakings

Another upside of outsourcing is the opportunity for businesses to innovate and kick-off projects more frequently.

This is mainly derived from the on-the-spot expertise outsourced help provides. For example, a company can manage time better by outsourcing right away as opposed to employing, hiring, and instructing a new, full-time employee.

READ: What I’ve learnt from outsourcing payroll

4. Third party providers are often highly motivated

If a worker lacks the expertise required for a specific job, a company can outsource the task with an added bonus by default. This means a contracted worker will probably be more enthusiastic and motivated to do a superb job with the hopes of getting commissioned for future assignments.

5. It gives greater access to core competencies

Another great benefit to outsourcing is the advantage of accessing others’ core competencies as well as a better ability to focus on your own.

Core competence concentrates on targeted skills that make a company unique in itself. It’s that “something” that makes it stand out from its competitors.

READ: Why you should stick to your strengths in business

Investopedia defines core competence as:

‘The resources and/or strategic advantages of a business, including the combination of pooled knowledge and technical capacities, that allow it to be competitive in the marketplace. They are what the company does best and consist of the combined activities, operations, and resources that distinguish the company from competitors.”

6. Outsourcing gives small businesses a step up

Rarely do small businesses carry the clout of larger companies. Despite that, outsourcing gives small businesses a step up by leveling the playing field due to access to highly-skilled labour and expertise that bigger companies favour.


When’s the best time to outsource?


The perfect time to outsource varies with each company.

A business may maintain a limited staff and only require outside assistance for specific tasks. Another company may have adequate staff but require help when taking on additional projects.

When day-to-day operations of a business becomes overwhelming, outsourcing is the ideal solution.


The sticky issue of finance


Finances are an unavoidable sticking point when it comes to managing a business. Hiring the services of a competent financial adviser is the best way to allocate finances when outsourcing.

Additionally, making such a decision allows businesses to focus on other important areas like development and customer service. Business owners should “concentrate on what they are good at.”

If not, precious time will be taken from the company that could be better invested in other crucial business endeavors.


A final word on outsourcing


Both large and small businesses are increasingly outsourcing work due to the innovation of technology.

The ability to hire workers from anywhere in the world with the click of a mouse is quite impressive. In fact, many professionals like marketing directors, paralegals, virtual executive assistants, IT professionals, and so on, are leaving the nine-to-five workday in order to enjoy more time with their families or pursue other interests while maintaining a decent salary.

When business owners can invest more time and energy in growth opportunities instead of stressing about tasks better suited to others, then outsourcing has achieved its goal.

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