Top 5 achievable benefits of outsourcing for your business

2 May, 2022

Top 5 achievable benefits of outsourcing for your business

At Lynkia we want you to focus on your core activities, the ones that make you outstanding!

Outsourcing is the business practice of contracting with an outside party to take care of certain tasks instead of hiring new employees or assigning those tasks to existing staff[1]. It is a popular way for businesses to lower operational costs and streamline operations while still handling important functions. Outsourcing can help your business with profitability, innovation, and growth.

Companies have traditionally used outsourcing to cut costs, but today, it is all about accessing skilled expertise and flexible staffing opportunities, reducing overhead, increasing efficiency, reducing turnaround time, and increasing your business’ profitability. According to Process Synergy Inc.[2], companies can employ an outsourcing strategy to better focus on the core aspects of the business. Regardless of whether you are a small or mid-sized business, correctly leveraging outsourcing opportunities will surely help you “level up” and will provide a variety of benefits.

Below are the top 5 benefits of outsourcing:

  • Increased focus on core strategies that add value to your business: Outsourcing takes care of operational tasks, which allows you to free up your staff’s time to focus on core activities and refocus your in-house resources on the activities that make you profitable without sacrificing quality or service. Outsourcing allows you to focus on enhancing your organization’s strengths and improving upon aspects needed to achieve the organization’s goals, without spending time and energy on back-office, unknown, or secondary activities.

For example, an organization’s back-office operations tend to increase during periods of rapid growth, so by outsourcing HR responsibilities, you free up staff to focus on the most successful and meaningful activities.

  • Boosted profitability as a result of staffing and infrastructure cost savings: Achieve payroll cost savings by hiring third parties to provide specific services which are time consuming and for which you do not have the experience and knowledge in-house. Also, cutting hiring, onboarding, healthcare, and benefits expenses, or even due to economies of scale, when the volume of sales allows you to leverage a more economical operation. Lower ongoing investment in internal infrastructure or overhead, for example, by outsourcing simple operations such as telemarketing or data entry rather than moving to a new location. Operations with rising costs should be considered for outsourcing!
  • Increase efficiency by outsourcing non-core activities with faster and better services: outsourcing provides non-core activities that can improve efficiency and productivity because another entity performs these smaller tasks better than the firm itself. Outsource the most unproductive areas or employees, provide flexibility, reduce response time, and optimize resources.

For example, outsourcing human resource functions will reduce risk of unforeseen events in internal logistics and allow the company to keep operating while the manager is unavailable, or the office is understaffed. It also gives you time to hire a new vacancy without rushing the decision or paying turnover expenses.

  • Access to skilled resources without spending on advancement or development: have you thought about the cost of training and developing your employees rather than hiring third parties for specific skills? With outsourcing there are opportunities to access innovation, intellectual property, thought leadership, technologies, and latest trends immediately in order to disrupt your industry. Moreover, it takes less time and money to outsource people with specific skills who can ultimately teach your employees how to develop these skills themselves.
  • Achieve new levels of scalability by only paying for what you use: The extent to which a vendor allows you to scale back operations influences the decision of being able to outsource only those projects which may prove expensive to manage internally, by paying for what you use. Scalability by requiring demanding staff or services during high-traffic or peak activity periods to better service clients and customers.

In fact, recent research conducted in the article “Aligning organizational control practices with competitive outsourcing performance” [3], outsourcing strategies influence organizational control mechanisms that impact outsourcing outcomes, it means that efficiency and innovation seeking must be related to supervisions, metrics, pre-specified procedures, formalized roles and job descriptions, training, rigorous reporting and approval processes for managing organizational routines, problem solving, and goal-directed activities. Complementary, outsourcing performance includes both cost reduction measures and overall strategic value dimensions from a financial and strategic perspective.

As firms strive to meet complex product and service requirements in a dynamic global market environment, it is all the more critical to align organizational control practices with competitive outsourcing performance, and thus, future research in this area will be even more valuable. This way, outsourcing certain aspects of your business may be one solid way to save money without sacrificing results and many benefits of expert knowledge without having to build a specialized internal department. Finally, outsourcing strategies should be linked with organizational practices to ensure a win-win relationship, with better quality and performance.

Outsourcing vs Offshoring: According to CIO magazine [4] from United States, the term outsourcing is often used interchangeably — and incorrectly — with offshoring, usually by those in a heated debate. But offshoring (or, more accurately, offshore outsourcing) is a subset of outsourcing wherein a company outsources services to a third party in a country other than the one in which the client company is based, typically to take advantage of lower labor costs.

[1] James Bucki, «Top outsourcing advantages», 2020, https://www.thebalancesmb.com/top-outsourcing-advantages-2533765.

[2] Prosync, « Prosync», 2020, https://www.prosync.com.ph/page/about-us.

[3] Zongyuan Zhao et al., «Investigation and improvement of multi-layer perception neural networks for credit scoring», Expert Systems with Applications 42, n.o 7 (1 de mayo de 2015): 3508-16, https://doi.org/10.1016/j.eswa.2014.12.006.

[4] Stephanie Overby, «What is outsourcing? Definitions, best practices, challenges and advice | CIO», CIO, 2017, https://www.cio.com/article/2439495/outsourcing-outsourcing-definition-and-solutions.html.