June 2, 2020 Last updated June 2nd, 2020 1,679 Reads share

Outsourcing Is On The Rise

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Do you know that as companies rush to shed cost, more than one-third of small businesses currently outsource a business process? In the next 12 months, 52 percent of new business owners plan to do so, and the global outsourcing industry generated 88.9 billion U.S. dollars in revenue. Quite astonishing, right?  Companies seek innovation from outsourcing agreements, but many are unsure how to define, motivate, and track it. Outsourcing, today, becomes a potent tool to leverage talent, improve productivity, and reduce work cycles.  For a business to get through the teething stage and gain recognition, it must have its unique system. Without a doubt, building a business from the ground up takes a lot of work, but it doesn’t have to be your work?

Congratulations! You might have started your business all by yourself. It’s up and running and ready to grow. But here’s the problem: if you continue to go along with the wrong team, you’ll never grow it right. For an expanding business, increasing operations means shouldering additional expenses. More marketing duties, for instance, means more personnel and equipment to invest in. This is one of the reasons business process outsourcing was made.  Outsourcing is an excellent way to find top talent at affordable rates. And, when you’re able to effectively tighten your purse strings, without suffering quality of work, why wouldn’t you outsource? Moreover, If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.

Why Should You Consider This Global Concept?

Outsourcing over the years has been seen to pave the way for an organization’s concentration on its core competencies.  Outsourcing was introduced in the late 1980s as a way entrepreneurs could gain a competitive edge in the new global market and is now widely used across several fields.

An organization can hire the exact person or team they need for a specific project and it doesn’t matter if that person or team is located halfway around the world. Thanks to technology and the internet, access to technical experts is easier and more affordable than ever before.

So why should you outsource? Should you hire someone instead? Is it going to make your business life easier? And if it is, for what reason?

Reduce and  Control Costs

Perks of partnering with an outsourcing company can be sum up with flexibility and cutting costs. For many businesses, certain tasks such as data entry, document, training, and hiring processing are too much expensive and time- consuming. This has been the main reason why businesses began outsourcing.

An article by Harvard Business Review explains that 20 percent to 30 of cost is reduced usually when outsourcing comes to play. However, these outsourcing companies utilize resources ensuring the best-optimized process to deliver success to a business.

With your employees in your office, currently, you have an obligation to pay a monthly salary, national insurance contribution, and a certain percentage of tax per employee. Rather than employing a number of full-time staff who are on the payroll even when their service may not be required, outsourcing provides you with a flexible workforce who can work only when needed. Costs only arise when a project is being processed. If occasionally the service of the external service provider is not required, no cost arises either. Even for smaller businesses, this pays off, by cutting off uneconomical expenditures so as to increase the quality of work.

Enables Core Functions

In addition to cost savings, you can employ an outsourcing strategy to better focus on the core aspect of your business. Core function involves the collective learning in your organization, especially how to coordinate diverse production skills and integrate multiple stream technologies.  This also serves as the main value for a company to develop a sustainable competitive advantage, positioned to achieve when you outsource. Although, core activities should remain in-house. When a business function gets busy and complicated which may also include product development or culture, such as employee dedication, best human resource management (HRM), good market coverage, etc., core functions can get overwhelmed by outside issues. Outsourcing these functions enhance efficiency and productivity because it helps perform tasks better than the firm itself.

Solves Capacity Issues and Critical to Business Needs

What makes some business ventures better today is that they were able than others to solve the tough and physical challenges they face. If you could remember the case of Alibaba, founder Jack Ma showed charismatic leadership in his management. Jack Ma had to outsource when he discovered that the trading state between the U.S and China is a capacity issue that needs to be solved. However, he was able to procure the solution needed and the process of outsourcing has been the major factor behind the growth and success of Alibaba. Other companies that use outsourcing processes to solve tough challenges are Whatsapp, Google, Skype, and Basecamp.

Manage Business Environment

In general, a business environment means all forces that surround you. Contracting out your business environment involves the delegation of noncore operations or jobs from internal production to an outside resource. This is often made to focus on your core function. Several companies now have already started to outsource to gain an advantage over their competitors ingrained in their corporate philosophy. Due to the fact that this process helps to evaluate internal analysis and vendor selection which tribute effective implementation and management.

Outsourcing Model For Organization’s

In small businesses, the business processes can be grouped into four functional areas; administration, content, delivery, and technology.

However, the number of processes a supplier manages and the duration is expected to manage these processes in order to define the differences in outsourcing strategies. Business process outsourcing takes these processes most strategic to any business. Whereas out-tasking refers to the models that are less complex.

With Business Process Outsourcing, your goal is typically longer-term and focuses on the realization of overall business benefits. Whether enhancing your organization’s competitive position in the marketplace or improving shareholder returns.

These four outsourcing models are briefly differentiated below:

Comprehensive Model

If your company is considering moving towards an outsourced model for benefits administration, then consider adopting a comprehensive view. The comprehensive model of outsourcing is a long-term arrangement between the business owner and the outsourced agency or partner. This is the traditional outsourcing delivery model wherein the outsourcing service provider manages the full scope of processes, services, and activities on behalf of your company that outsources its services. The full scope of services includes:

  • Performance management
  • Operations management
  • Quality assurance
  • Facilities management
  • Human resources (HR) functions (e.g. payroll, recruitment, training),
  • IT support
  • Finance and Accounting

Selective Model

The selective model is a targeted sourcing strategy that relies upon sending very specific functions and works off-premises while keeping other functions on-premises. There are many reasons organizations pursue a selective outsourcing strategy, including cost management, and the ability to access skillsets not possessed by staff members. This model is generally successful and used for two main reasons; Firstly, companies that outsource an entire activity tend to be constrained in their ability to control the supplier. Second, Companies have access to the operational knowledge and information required to design effective reporting systems. Here you may contract with a supplier for the next coming years to manage all custom content development activities.

Contracting Model

This is sometimes referred to as the labor for hire engagement, the most common form of outsourcing small business industry incorporates the most. This where you pay a contractor by the hour/day/week/month to perform a task.  When you need to manage a project, you compensate them by informing them so as your project to be completed.

Achieving Success or Failure of Outsourcing

Organizations consider their outsourcing projects unsuccessful or as failures when the costs of managing the links between outsourcing partners were greater than the benefits generated by outsourcing programs.

A good choice of outsourcing partners is the most useful and contributing factor among successful organizations. And this process must be done carefully, systematically, and with explicit goals and expectations.

Factors identified among the top priorities in successful firms include:

  • Adequate performance feedback
  • Emphasis on both short and long-term benefits
  • The anticipation of change for both good and bad times
  • Accommodation of cycles of demand that require an adjustment in services.

Nevertheless, unsuccessful firms identified the fear of change, including fear of job loss as the most serious problem.

In Conclusion

Outsourcing has implications for day-to-day management and performance, as well as strategic implications.  Therefore, you must outsource intelligently. It is difficult, if not impossible, to agree on the origin of outsourcing as a practice, but that’s notwithstanding, outsourcing enhances service provision and provides additional income for businesses even without spending.  However, this can be achieved, likewise the successful attribute, if you make the perfect conceptual framework.

outsourced workers -DepositPhotos

Adedeji Omotayo

Adedeji Omotayo

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