Outsourcing means using external resources or getting help from the outside of the organization with a view to benefiting from their experience, efficiency, and expertise. It is a cost-effective method to manage the innumerable tasks of business.
Today, many big companies such as Apple, HP, and many others opt to outsource certain functions and job roles. They will choose a location where labor is very cheap, but the skill of human capital is relevantly acceptable. Countries such as China, India, Philippines, and Malaysia are the most targeted by the big companies. Outsource suppliers focus on service delivery and consequently are more efficient and typically can deliver the service at a higher quality or at a lower cost.
Cost savings is one of the most popular reasons for outsourcing. When a company outsources, it hopes to save money by reducing its own costs. It hopes to pay an outsourced supplier less money in the form of fees than it currently spends on delivering the service itself.
Below are some ways to save money by outsourcing –
- Employee Training Expenses
Keeping employees trained is an ongoing expense that can be very costly. Companies spend a lot of money to train each of its employees. However, when you outsource, it’s not your responsibility to spend the money, time and resources to train the employees working at the outside firm.
- IT Outsourcing
The demand for IT outsourcing is increasing as many companies are in need of IT staff that can handle the complex computer networks. However, IT professionals demand extremely high salaries. Moreover, managing the IT staff is not an easy task, as their performance impacts the organization directly. Another major reason for IT Outsourcing is that IT departments take up a lot of space. So, if a business doesn’t have enough space or money to hold monitors, keyboards, laptops etc. it can outsource IT staff that’ll bring in their own inventory and equipment.
- Telecommuting Outsourcing
Telecommuting or Working from home or any other place other than the office is one of the most commonly outsourced services. The businesses who cannot afford to buy or expand their office space outsource some of their work to freelancers who telecommute. Thus, outsourcing prevents the companies from incurring any fixed costs if hiring employees.
- Outsourcing Employee Benefits
Employee benefits such as insurance are a way to attract and retain talent in a company. Companies provide multiple insurances to its employees. These kinds of benefits motivate the employees to work harder to achieve the best results. But, if the company will not provide these benefits, it is more likely to lose one of its best talents to competitors. Therefore, it is advantageous to outsource certain business tasks to the outside firms, so that you can lower the amount spent on these expensive benefits.
- Outsourcing payroll
It is one of the most common functions to save money. In order to avoid paying the penalty for late or incorrect tax filings, companies outsource this responsibility to the outsource payroll firms. They take the responsibility to file the taxes properly as well as reimburse the companies if they are fined. Payroll firms are up-to-date with all the tax laws and government regulations and are capable of managing the entire payroll for the company.
- Outsourcing Finance and Accounting
Finance and Accounting is one of the most important functions performed by the company. However, many businesses find running these functions as part of in-house operations, complex and expensive. Therefore, many companies are outsourcing their finance and accounting operations in exchange for numerous benefits. Finance and accounting outsourcing companies can handle a vast quantity of data. They keep themselves updated with changing accounting rules and are aware of all the latest applications which are suitable for the business. Most importantly, they assure error-free accounting and bookkeeping.
Outsourcing is reshaping the way business is and will be conducted. If you’re considering an outsourcing project to improve a service or process, make sure that you understand your company’s position on the service and price expectations of the supplier. Even if you’re outsourcing for reasons other than cost savings, you need to understand your own costs in order to determine whether the prospective suppliers are valid.