What is Outsourcing in Business?

Since 1989, labour has been outsourced to reduce costs, regardless of the efficiency of the business. Outsourcing is transferring responsibilities that should be handled by an in-house workforce to specialised third parties, while core business operations are focused on.

Outsourcing tasks in business is capital-intensive and less labour-intensive. A business may decide to take this approach for reasons including the urgency of project results which its traditional workforce will need training before commencement, or shared focus on core responsibilities. Many others outsource to reduce paying bills for full-time employees who aren’t engaged at times. Other cost minimisation includes substituting rigorous labour costs for capital costs. More often than not, outsourced responsibilities are delivered with excellence from service providers and at a price favorable to the outsourcing company. Outsourcing offers the involvement of a wider range of services without having to employ new staff.

Services that can be outsourced range from security to cleaning agents, customer service, human resource, systems management, accounting, financial modeling, payroll, and so on as it best suits a business. Any company may opt to outsource any position, but it should be conscious that some tasks, like monitoring the company’s financial books, are sensitive and should be protected from externalities to prevent the loss of proprietary information.

Types of Outsourcing for Small Businesses

●       Onshore Outsourcing: As the name implies, it’s hiring service providers in the same country as the hiring company. It is also called local outsourcing. Outsourcing locally is helpful as language may not be a barrier in communication. Other advantages include having common cultural grounds and the opportunity to meet the service providers in-person.

●       Nearshore Outsourcing: This isn’t within a business‘s immediate environment but it is around and close to its reach. This is outsourcing workforce within the same continent or close regions. Due to the use of the same or nearby time zones, and reduced shipping delays, it is favourable. The advantages of onshore and offshore outsourcing are combined in nearshore outsourcing.

●       Offshore Outsourcing: This type of outsourcing happens over long distances. Offshore outsourcing gives an opportunity to employ experts unavailable within the local environment. Shortfalls to this type of outsourcing include; language and communication barriers, time zone disparities, authenticity of service provider, reliability to deliver when due, amongst others.

4 Major Areas of Outsourcing

1. Technical Outsourcing

For purchase, installation, or maintenance of tools and equipment used in the production industry, they often require specialist knowledge. To oversee system operations, a company may require IT engineers. These are the operational services necessary to control a company’s technical systems.

2. Process Outsourcing

In order to arrange a company’s processes, such as managing employee interactions, this involves enlisting the help of professionals in related industries. In this sector, outsourcing might be used for the recruitment process, legal process, or knowledge process. In order to achieve the company’s objectives, knowledge process outsourcing includes research, fact-finding, and foundation analysis. Outsourcing legal procedure entails meeting constitutional requirements for services, rules, and legal proceedings. Outsourcing the hiring and discharge of employees, the knowledge of job openings, and recruitment assistance are all included in the recruitment process.

3. Multi-outsourcing

Employing companies that provide more general services is what this entails. They provide both business and technical services. A few examples are companies that operate under the same brand and provide both security and janitorial services.

4. Professional outsourcing

As the name suggests, this is concentrated on hiring individuals with professional capabilities, who are typically with a license to function in that capacity. This comprises of chartered accountants, business strategists, designers, and so on. Professional outsourcing makes use of knowledge, contacts, and resources that are not directly held by the business.

Benefit of Outsourcing for Small Businesses

Growth is typically a significant goal, though company goals and visions vary. However, since some firms like to maintain control, outsourcing might not be the best strategy for all businesses. However, it offers a range of capacities, flexibility to adjust to new working circumstances, emphasizes strength and access to great talents. The benefits of outsourcing are excellent instruments for expanding a company and successfully achieving business objectives.

Also read: Let’s Talk Outsourcing.