What can you really get out of outsourcing?

Yesterday, we released a free, downloadable whitepaper to help people interested in outsourcing tech support while on a very strict budget. But outsourcing isn’t just limited to technical support; outsourcing companies exist in every industry, from construction, to finance, and even manufacturing. Today, we’re going to go over what outsourcing actually is, a few of the reasons why a company might need to outsource, and a few of the benefits of outsourcing projects.

Outsourcing vs. Offshoring: An Important Difference

First of all, outsourcing is not a bad thing; its bad reputation mostly stems from people confusing it with offshoring. Offshoring is when a business relocates an aspect of their company from one country to another. This is typically done with operational processes, such as manufacturing, or support services, such as customer call centers. This practice is generally considered favorable by companies, as it can lead to cheaper production costs and quickly expand a company’s labor pool. However, offshoring has a very negative reputation, especially among the media, due to the fear that it takes jobs away American workers in favor of saving money. Additionally, offshore companies are often in very different time zones, and may present issues with language barriers and technical experience.

This is not what general outsourcing is. Simply put, outsourcing is when a company buys a third-party product or service in order to supplement their own products and services. While the third-party company may or may not be located abroad, the operative word in outsourcing is “supplement,” not replace or relocate. An example of this would be if a large retail company hired a construction company to build or renovate a store; this does not take jobs from employees within the company because no one on payroll does construction work. Why would they? They are a retail company whose primary focus is on the sale and distribution of products at an affordable price. Most of their employees in the corporate offices will be business professionals, while employees in the stores will be customer service professionals. Furthermore, building a store is typically a project.

An infographic outlining the difference between offshoring and outsourcing. Image courtesy of tutur2u.net
Yes, the difference is that simple.  Image courtesy of tutur2u.net

Project Management Made Easy

As it turns out, this is the primary reason companies outsource. They may have all the people they need for their day to day operations, but a project has come up that they just don’t have the knowledge to complete it on their own. Rather than hire someone full time that the company won’t need beyond the scope of the project, they can outsource to a company that specializes in what they need done, like a construction or an IT company. What’s even better is that not only do these outsourcing companies offer specialized skills, but they often act as one-stop-shops for all stages of the projects. Most outsourcing companies will have everyone on staff that is required to get the job done, from the planning stages, to project management, product creation, and implementation. This also saves companies a bundle when it comes to cost.

Cost Reduction Benefits

When a company hired new people to their company for a project, they become responsible for paying for things like their salary, benefits, and employee based taxes. Time must also be spent on training and acclimation to a new work environment and corporate culture before new hires can begin working on a project. And what about equipment? If it’s for an IT project, it’s true that most companies have computers, but they may not have the software required to complete their project and program licences can be expensive.

When hiring an outsourcing company, all of the cost concerns are typically covered with an agreed upon fee or rate for the services rendered. This may be a one time lump-sum payment, or a recurring monthly plan; either way, the agreed upon amount is almost always cheaper than what a company would have to pay for in-house services. Training is usually not an issue, as outsourcing companies are made up of experienced team members who are ready to start as soon as they have the project details and are oriented to the product. Not to mention that once the initial team members are up to speed, it becomes their responsibility to train new additions to the project, not yours. Also, because outsourcing companies are specialists in their fields and often have their own connections and deals with licensing vendors, there’s often little need to pay for additional equipment.

A pie-chart featuring the top reasons for outsourcing. Image courtesy of e-bridgeonline.com
The top reasons why a company chooses to outsource.  Image courtesy of e-bridgeonline.com

Better Employees, More Jobs

This seems counterintuitive, but strategic use of outsourcing can actually improve employee retention and keep in-house positions growing. Hiring an outsourcing company leaves your own employees free to work on their current projects. This is especially important among small tech companies, where developers and project managers often get caught up with customer support instead of working on the company’s product. This means the company is unable to grow at a sustainable rate. In fact, 90% of startups fail to thrive in large part because they are unable to expand their business, according to Forbes.com.

Outsourcing doesn’t even have to happen just for the sake of a special product; as a small business expands, they may find themselves short-staffed to handle all the tasks that crop up over the course of the day. Outsourcing can give them immediate access to an experienced team ready to take on some of the burden, giving the company time to onboard and train new hires, or get caught up in their workload.

The pros of outsourcing. Image courtesy of apoyocorp.com
When laid out in an infographic, it’s easy to see all the pros to outsourcing! Image courtesy of apoyocorp.com

Outsourcing as an industry has been on the rise since 2014, according to Deloitte’s 2014 Global Outsourcing and Insourcing Survey. More and more companies are relying on third party products and services to keep their company running smoothly, and it’s easy to see why. A good outsourcing company, like Deep Core Data, can provide the right team with the right skills at an affordable rate for any project. If you would like to learn more, we encourage you to check out our free, downloadable whitepaper on outsourcing, or to contact us at info@deepcoredata.com.

2017-01-29T18:06:22+00:00 April 7th, 2016|Business Practices|

About the Author:

Andrew is a technical writer for Deep Core Data. He has been writing creatively for 10 years, and has a strong background in graphic design. He enjoys reading blogs about the quirks and foibles of technology, gadgetry, and writing tips.

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