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Home » Articles » Top 4 reasons why companies outsource

Top 4 reasons why companies outsource

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Outsourcing lets organizations delegate their processes to a third-party provider. This is a strategic move for companies when they decide to expand their business operations offshore.

Clients delegate specific tasks in a short-term or long-term contract depending on their outsourced services. They can even transfer the entire internal team to their outsourcing company when they want it.

There could be many reasons why companies outsource their services. This article discusses the top four reasons for doing so.

4 reasons why companies choose to outsource business processes

Companies outsource jobs and services for several reasons – cost saving, cutting back on resources, making more room for growth, remaining on top of the industry ranks, and more.

Businesses are better off with outsourcing as one of their primary business models. Small companies to prolific names delegate their services to external providers to enable their in-house team to perform services in their expertise.

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Outsourcing can give you a competitive edge over your competitors. If you are new to outsourcing and want to hire your first call center or BPO company, you might relate to some or all of these reasons.

Why do companies choose to outsource work

1. Save on labor costs and operational costs

Labor and operational costs are some of the main reasons why companies outsource their services.

Business outsourcing gives you access to skilled workers and resources you need for your operation. Outsourcing companies help you hire highly educated staff offshore at a fraction of the cost of their local counterparts.

Most outsourcing providers in lower-cost countries such as India and the Philippines have low costs of living. A minimum of $500 per month can go a long way, with bonuses and benefits already covered.

At the same time, your outsourcing partner will take care of the equipment and space for your entire operation, so your company does not have to shell out money for in-house employees. You can save up on office space, desktops, phones, and office supplies, to name a few.

Given that you don’t need to provide these resources, you can save money hiring in-house employees, scale quickly, and prioritize your core business.

2. Save time and effort

Outsourcing’s potential for further savings is one of the main reasons it is a sought-after strategy.

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An eight-hour shift could be easily consumed by routine tasks such as answering emails, data encoding, and bookkeeping. These tasks can drain the energy, effort, and creativity of your team, eventually resulting in more employees leaving.

Multitasking can even hurt your and your team’s productivity. As a result, you might have difficulty motivating them and getting the required output quality in their work, thus affecting customer satisfaction.

This is one of the reasons why companies outsource time-consuming tasks; to free up their team’s time so they can take on the core aspects of their responsibilities.

3. Focus more on core competencies

The entire idea of an outsourcing strategy is to save money, time, and effort to focus on the core aspects of your business.

You can focus on your core competencies by delegating small, day-to-day tasks to your outsourcing firms. When used effectively, this gives you some leverage among your competitors, plus a work-life balance.

4. Lessen operational risks when scaling

Lastly, when you outsource work and services, you also share some risks with your BPO. This includes operational risks when you decide to put up an offshore office.

They will take care of the requirements and compliances needed to set up a new office. You can ensure that your team will be in a proper office space with adequate workspace, high-speed internet, and a clear phone connection.

They can also take care of employee training, monitoring, and salaries, as included in your package. When demand for a specific task goes down, you can quickly scale your full-time employees with them.

Why outsourcing work is necessary

Outsourcing, along with offshoring, remains to be an integral and cost-effective part of the BPO industry. Whether outsourcing a business process or manufacturing services, teaming up with an external business outsourcing partner will give you several advantages.

Most companies flourish when partnering with qualified professionals from external firms. In response to the sudden boom in the industry, organizations responded positively to the service provided by outsourcing agencies.

Of course, some executives and industry leaders have met this movement with hesitation, which should not surprise anyone.

That being said, measuring your outsourced team‘s performance and success shouldn’t be hard. With all the new technology and platforms in the market, everyone can see the ongoing projects, the finished ones, and the upcoming works of every team member.

Outsourcing is essential globally as companies pave the way to gain access to better services. It ensures prospective employees do not waste their potential and skills, whether on the other side of the world or behind a couple of time zones.

This case study by Everise can help you better understand the benefits of offshoring for any business.

Why outsourcing is necessary

Types of outsourcing

Outsourcing is a multifaceted business strategy, and companies often engage in various types depending on their specific needs and objectives.

Understanding these different categories provides insights into the diverse ways businesses leverage external resources to enhance efficiency and focus on core competencies.

Business Process Outsourcing (BPO)

Business Process Outsourcing involves contracting out specific non-core business functions to external service providers. Common BPO services include customer support, human resources, finance and accounting, and procurement.

Companies opt for BPO to streamline operations, reduce costs, and access specialized skills.

Information Technology Outsourcing (ITO)

Information Technology Outsourcing focuses on delegating technology-related tasks and responsibilities to external vendors. This includes software development, infrastructure management, network maintenance, and technical support.

ITO enables companies to stay technologically competitive while leveraging expertise and cost advantages offered by external specialists.

Knowledge Process Outsourcing (KPO)

Knowledge Process Outsourcing involves outsourcing more complex, knowledge-intensive tasks that require specialized expertise. This often includes research and development, data analysis, and other high-level cognitive activities.

Companies choose KPO to access domain-specific knowledge, innovation, and advanced analytical capabilities.

Manufacturing outsourcing

Manufacturing outsourcing entails contracting the production of goods to external suppliers. This is particularly common in industries such as electronics, apparel, and automotive.

Companies outsource manufacturing to take advantage of cost savings, global supply chains, and specialized production capabilities.

Offshore outsourcing

Offshore outsourcing involves contracting services or manufacturing processes to companies in a different country. This global approach is driven by factors like labor cost differentials, access to a diverse talent pool, and the pursuit of 24/7 business operations.

Offshore outsourcing is prevalent in IT, customer service, and manufacturing.

Things to consider when hiring a BPO company

A hot debate has come along on the topic of outsourcing. It is always a question of whether the company you’ll be outsourcing to can accomplish the needed tasks.

The solution always comes with good research. Consider the following when you decide to hire your first call center or BPO company:

  • How long has the company been on the market
  • Relevant expertise
  • The quality and success of projects they’ve made
  • Their online presence
  • Feedback from their current and past clients

While these are not fool-proof solutions to finding the right outsourcing partner, considering these factors can help you effectively choose a firm that could fit your ideal business model.

The best way to ensure the partnership works out is to be clear about everything. Draft a contract to specify every detail of the outsourced tasks, so you can get the other party’s commitment and focus on providing the services you need.

Depending on your vision, outsourcing could be a great strategy to help you maximize your business and reach its full potential.

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About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

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Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 450+ podcast episodes, and a comprehensive directory with 3,900+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.

“Excellent service for outsourcing advice and expertise for my business.”

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