Top 10 Reasons Why Companies Outsource

Whether the economy is booming or lukewarm, businesses of every size are looking for ways to enhance their business offerings. One of the most popular moves that North American firms can make to improve their efficiency and better serve their customer base is to outsource.

Outsourcing is when a company strategically hires employees in offshore or near-shore countries to perform jobs that may usually be performed by inside staff in a more traditional business set-up, such as manufacturing, call centers, information technology support, graphic design, and even security.

To meet the growing demand of skilled staff to serve businesses in North America, many outsourcing companies choose to provide specialized workers. These are some of the top reasons why companies of every size choose to outsource.

1. Reduces Operating Costs

It takes a lot to run a business, from research and development to marketing, logistics, and even staff. Those businesses that do everything in-house can incur huge costs, which ultimately get passed onto the consumers. Outsourcing certain jobs can help lower operating costs and increase a company’s competitive edge. As a result, a company can use that freed-up money to fund a new advertising campaign, purchase new equipment, or develop new products.

2. Improves Company Focus

Companies are only as good as their reputations! Aside from products and services, a business builds its reputation through its customer service. Outsourcing can free up a business from working on areas that are not in its expertise. Outsourcing to an expert in the field allows a company to focus on its core business efforts, while still maintaining a well-rounded and positive reputation.

3. Offers Resources Not Available Internally

Sometimes, companies outsource because they do not have the necessary resources to do everything within the firm. Outsourcing from the very start is an excellent alternative for new organizations, subsidiaries, or companies expanding into new territories or even new technologies.

4. Easier to Downsize

When business is good, companies expand. When business is bad, companies have to make tough business decisions. Downsizing is never a popular choice, but from a business perspective, it can be vital. Because of different international labour laws, North American companies can upsize or downsize at will. Of course, outsourcing can make this move easier.

5. Manages Risk

Operating a business is a risky venture. Why? Because to succeed, businesses need the right management, funding, products or services, and economic climate to excel. This might explain why the start-up business failure rate in the U.S. is 25% in the first year and 50% by the fourth year of operations. By outsourcing certain tasks, a business can share responsibilities and reduce risk.

6. Frees Up Resources

When it comes to business, time is money—and there’s never enough of either. But outsourcing can help. Every organization has limited resources; outsourcing allows businesses to redirect their resources to their customers.

7. Lessens Time Needed to Get Up and Running

Just because a business can do something in-house doesn’t necessarily mean it should. There’s more to outsourcing than the bottom line. Outsourcing tasks to experts in a particular field means a new business can be up and running right away. Outsourcing then, can be a much faster alternative to downtime associated with recruiting, interviewing, and training new staff.

8. Hedges Against Uncertainty

You don’t need to look further than the 2008 recession to see how deeply economic and political uncertainty can wreak havoc on a business. In fact, a 2008 survey revealed that 25% of CEOs said that “uncertainty about the political and business climates” was a primary factor for outsourcing. Concerns about higher taxes, regulation, and imports and exports have a direct impact on the way companies make their hiring decisions. Businesses are increasingly looking not just months into the future, but years, and in some cases, even decades. Outsourcing can be a hedge against political and economic uncertainty.

9. Improves Competitiveness

“The early bird gets the worm”—that axiom works perfectly in the world of business. The first business to market a product or service gets a serious head start over the competition. Outsourcing is a time-sensitive, financial incentive for businesses with a short-term window of opportunity.

10. Creates Jobs Through Small Business

When it comes to outsourcing, most people picture large companies letting people go to save money and appease shareholders. However, it should be noted that the 23 million small businesses in the U.S. account for 54% of all American jobs. At a time when corporate America is downsizing, the rate of small business start-ups has grown. In fact, the number of small businesses in the U.S. has increased 49% since 1982. Since 1990, big businesses have eliminated four million jobs; meanwhile, small businesses have added eight million new jobs.

To get a competitive edge, many small businesses turn to outsourcing to remain efficient and competitive.

Sources:

“Small Business Trends,” U.S. Small Business Administration web site; www.sba.gov/content/small-business-trends, last accessed January 7, 2014.

“Startup Business Failure Rate By Industry,” Statistic Brain web site, July 27, 2013; http://www.statisticbrain.com/startup-failure-by-industry/.