What is Outsourcing?
Outsourcing is the business practice used by companies to hire a third-party who is not with the company to perform various tasks, services, job functions, or production as opposed to keeping those tasks in-house. Almost anything can be outsourced, and there are several benefits and reasons companies outsource.
Benefits
In many cases, outsourcing is used to save the company money. If there is another company that can perform duties or create goods faster, cheaper, and/or of better quality, money can be saved by using that outside company as opposed to having the work done in-house. The work you have outsourced might take all day for one of your highly paid employees to finish, so you outsource to have that same work completed quickly and cheaply.
If performed efficiently, outsourcing can be more efficient and productive, it can save money, a job can be performed better than the company itself, and quicker completion times. If the company has to hire someone to do a specific job, purchase the equipment necessary, and pay to have an employee trained, it is often cheaper to outsource that service. This all leads to a competitive advantage.
Examples
A good example of outsourcing would be a housing contractor. A contractor might have employees who know how to do plumbing, concrete, drywall, carpentry, roofing, painting, siding, and electric work. But if they don’t have someone to handle one of those tasks, they would outsource the task to another company that specializes in that task and can successfully complete the work at a fair price. For some work, the employee may have to have certain training certificates to complete a job. If the contractor does not have someone with that certification, outsourcing is an obvious choice.
Some companies have their bookkeeping outsourced simply because it’s cheaper than keeping an account on the payroll full-time. Cleaning services are also popularly outsourced and are performed during the off hours when most employees have left the business property.
Most Common Outsourcing Jobs
‘howstuffworks’ says the 10 most popular jobs to outsource include:
Web Programmers and Designers
Computer Professionals
Medical Professionals
Personal Assistants
Human Resources
Security Guards
Tax Preparers
Call Centers
Drafters
Writers
Where to Find Outsourcing
Some of the more popular places to find outsourcing include Upwork, Outsource.com, and Fiverr. Upwork is for people looking for jobs and people or companies that need positions filled. Fiverr is popular because initially, most jobs only cost five dollars, but they are usually not extremely complicated. Now, jobs there can cost several hundred dollars but still save money. There are many companies on the Internet for someone looking for outsourcing services.
Outsourcing can occur onshore which is within the same country, nearshore which is to a neighboring country, or offshore which is to a country not close to the one where the company is located. We have all had the unpleasant experience of customer service representatives from other countries that are difficult to understand.
Problems with Outsourcing
There are times when a company outsources a service and doesn’t get what they think they will be getting. This is due to poor communication between the company and the company handling the outsourcing. Everything should be written in clear terms in addition to having a conversation between someone from the company and someone associated with doing the outsourcing.
If there is sensitive data involved in the outsourcing, there must be precautions taken by the outsourcers to protect the information from being leaked or shared to a competitor or hacker, for example.
Many jobs will outsource to foreign companies that have cheaper labor rates or laws. Especially in the manufacturing sector, many feel that these jobs belong in the United States. An example of that is an automobile manufacturer assembling in Mexico where labor is incredibly cheaper than the US and then shipping the vehicles back to the US before being sold.
Other problems associated with outsourcing include the job taking too long, less control in the final product, language differences, time zone issues, and the outsourcing party having insufficient knowledge of the service or product.
Outsourcing can be the smart way to save money and have a service performed the right way with a quick turnaround. It requires no overhead and has many benefits. Don’t get bogged down with several time-consuming projects in your company if they can be completed by an outsourcing provider.
If you have a new product or service that needs to be outsourced and funded, visit us at Affinity Beyond Capital. We have an expansive array of funding sources to provide you with the perfect funding solution for your small business. Call (833) 234-6489 today and speak with one of our expert lending professionals.