Sunday, July 22, 2012

Why Outsource?

Simply defined, outsourcing is the process of contracting the services of an organization or individual to perform a particular function.  Work arrangements under “Third Party” agreements also fall into this category --- the outside firm or individual being the third party or the service providers.  To date, outsourcing as a term has grown popular for this particular business model and has been widely used in the business community.

Outsourcing has proven to be a viable business strategy these days.  With the continued advancement of technology, global communication has become faster and more convenient.  These days, business communications are mostly done through e-mails and instant messaging services that provide platforms for chats, voice calls and video conferencing.  In addition, there are also numerous tools available that facilitate easier monitoring and online collaboration thereby producing more efficient results.  These advancements have contributed greatly to the spurt of the outsource industry.

Why outsource? Studies have shown that companies, small businesses and entrepreneurs outsource mainly for the following reasons:

1. To cut costs/to save money  -  Outsourcing narrow functions in the business organization, i.e. payroll, billing and data entry allows companies to harness competencies of outside service providers without incurring additional overhead costs that a full time employee would entail.  This is even carried out to a larger scale where an entire business operation is outsourced to a different country, i.e. call centers and other BPOs.

2. Focus on Core Strengths – Outsourcing non-core functions allows companies to re-align and maximize their manpower to attend to more important business activities that have longer and more favorable impact on the business. Yet they are still assured that back-office functions are still running efficiently.  Small businesses and entrepreneurs also outsource tasks like writing, web design, link-building, marketing and others to expert service providers thereby giving them more time to focus on other aspects of their business strategies and personal goals.

3. Operations Improvement – In cases where a certain division is swamped by projects causing internal staff to spread themselves thinly and creating a pile of pending tasks, yet operating over the budget --- outsourcing specific functions in the work cycle to expert service providers is often the solution.

4. Staffing Flexibility – There are functions in a business organization that have seasonal or cyclical demands for extra manpower, i.e. gift specialty businesses during the Christmas season, an accounting department during tax or audit periods and the likes.  Outsourcing additional manpower during these times ensures that additional demands are still met and satisfied.

5. Development of Internal Staff or Infusion of New Knowledge – There are occasions that call for upgrading of staff skills and competencies to meet demands of an upcoming important project.  Outsourcing the services of experts to work onsite and train internal staff on needed skills allow for easier knowledge-transfer and promotes staff development as well. 

There are probably more reasons out there --- feel free to share.  One thing looks definite though, as long as there are businesses or business endeavors --- outsourcing will continue to be a viable option.

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