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Outsourcing is not just a strategic option for large international corporations, small and medium-sized firms can benefit too from the efficiency, functionality, and cost savings of outsourcing. Outsourcing simply means “contracting out” various functions of your business. A common misconception is that outsourcing is always done overseas. Moving your IT helpdesk to India can save a lot of money, but there are many providers in the UK that can provide an IT helpdesk that is cheaper than having an in-house support function.
By outsourcing functions that were previously performed in-house, businesses can reduce their employee levels and related costs such as recruitment, salaries, and benefits. By outsourcing a capital-intensive function, you can also reduce the costs of equipment obsolescence and depreciation.
Because your firm is the outsourcer’s customer, they will want to keep you happy. You can therefore benefit from a more “can-do” approach, which may not always be what you get from an in-house team.
Outsourcers have to spend time and money on the most up-to-date equipment and on employee training to remain competitive. By outsourcing certain areas like website hosting, virtual desktops, or email, you are ensuring that your firm will always have access to the latest technology platforms. Taking IT as an example, an outsourcer is likely to have more up-to-date technology such as the latest servers and software.
By signing a contract to outsource, you will be able to lock the supplier into a pricing agreement. This gives the business certainty in terms of costs. As a result, the firm will be able to budget operating expenses and capital purchases more accurately, while reducing the likelihood of unforeseen costs.
If your firm is to be successful and profitable, the management team needs to spend time planning and directing the company’s business strategy and not wasting time worrying about managing administration, payroll, IT, or HR. Outsourcing these functions allows the business to focus its management resources on driving the business forward.
Some might argue that outsourcing creates a loss of control, less flexibility, questionable savings, and the risk of over-dependence on external vendors. Signing up to and implementing an outsourcing arrangement takes considerable management time. Finding and selecting the right outsourcing company can take months. Outsourcing companies need to be given overall direction and guidelines in terms of what needs to be done, and therefore, some level of supervision by management will ultimately be needed. It is important to be careful when deciding what business functions to outsource and to whom. The management team needs to be clear in terms of its expectations and the cost savings must be attractive and worthwhile for the business.