7 Gripping Reasons To Outsource
Updated: Jun 24, 2021
The reasons businesses outsource job functions are vast and increasing even more. Though the main reasons business owners choose this option are to cut costs in company operations, transform the company to become more competitive, and gain a workforce at a significantly reduced price.
7. Transitioning to New Systems
A company may need to transition to a new computer system or manufacturing system and may opt to outsource the positions responsible for installing and training in-house staff on how to operate the new system. This is usually temporary outsourcing based on the workload.
6. Reduced Risk
Over time, companies may need to utilize or employ a specific function but do not want the risks involved. Outsourcing these functions awards businesses the flexibility to select the roles they wish to manage in-house and those they would rather operate offshore. In doing so, companies can reduce their financial risk significantly. While a specific function may not impact the business’s core operations, it is wise to employ the best talent, which might be costly. So, Outsourcing talents is less expensive than hiring permanent staff for each function.
Furthermore, when deciding to introduce new products and services, having offshore workers reduces the financial impact if the new launch fails and enables companies to restructure and rebrand quickly to remain competitive.
5. Improve Productivity and Efficiency
To increase productivity, some companies might find it more efficient to outsource functions. For example, a company might find it more profitable to outsource an independent marketing specialist than invest time and money in the in-house staff’s hiring and training process.
Similarly, for specialized areas, such as accounting, HR services, and IT management, it is time-consuming when looking for the right people to hire for in-house departments. After which, they should undergo the requisite training process, then the additional time required to settle in their role entirely can result in massive time loss at a high cost. Outsourcing these business functions allows companies to focus on core operations without missing a beat.
4. Focus on Core Operations
The third primary reason companies opt to outsource is to allocate more time and resources to core business processes. Companies can focus on the most critical areas within their business without managing an HR or a marketing department. Outsourcing these functions allows for freer workflow for projects to be completed faster.
Companies are cutting costs where possible by outsourcing departments with less immediate impact on the business’s core functions. This way, in-house staff can focus on what matters.
3. Tax Cuts
Many companies enjoy the low corporate tax rates received by outsourcing job functions overseas. Countries like Hong Kong and Singapore have low corporate tax rates, which can significantly improve a company’s bottom line if they choose to outsource.
2. Reduce Cost of Operation
To save money, businesses are motivated to outsource certain services to reduce operating costs. Outsourcing becomes more appealing if a company encounters a cost increase in materials and needs to reduce production expenses.
Also, businesses considering merging, downsize or acquiring another company may find that some roles are excessive or redundant. Outsourcing helps to clear out the job clutter in-house and manage the business’s expenses during this shift.
In addition to paying offshore workers less, many regulatory costs such as health insurance and National Security are either less expensive or are not a requirement in some countries, which further reduces outsourcing costs. Should an outsourced worker earn the same as his/her in-house counterpart, lower regulatory prices are more attractive and cheaper for businesses to select the offshore employee.
1. Lower Pay Rates.
It is all about the bottom line. Outsourced contractors can provide the same or higher quality of services as in-house staff for a lower cost. So, companies tend to avoid the unnecessary expenses of hiring permanent staff for roles that do not directly impact the business’s core operation.
The increasing number of companies outsourcing their job functions proves that businesses stand to save more money. A research paper done by the NASA Glenn Research Center and the Cleveland State University in Cleveland, Ohio, outsourcing saved approximately 46% of costs over in-house operations. Lower wage is the most significant factor when outsourcing and the main reason more companies are employing offshore workers today.
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