What is Outsourcing?

Let’s start with the basics. Outsourcing is the process of hiring a third party to complete specific business functions or tasks. An outsourcing provider will handle duties on behalf of your company. You pay the provider for the work completed just as you would need to pay an in-house employee, but it ends up costing less to get the same task done when outsourcing. 

Some companies outsource many business functions to a third-party provider, while others only outsource one or two tasks. Business process outsourcing providers specialize in specific tasks, but almost every business function can get outsourced successfully to the right provider.

How does Outsourcing Reduce Business Costs?

There are many cost savings to outsourcing, some obvious and some hidden. Let’s go over the ways outsourcing lowers costs and saves a business cold, hard cash. 

Employee Costs

Payroll is often a business’s highest expense. Depending on the level of expertise your business needs, you may need to fork out high salaries to onboard the skill set required to get the jobs done. We can’t forget the cost of employees involves much more than salaries. You also have the employee taxes and benefits expenses. 

When outsourcing, you avoid all those costs. You simply pay a fee for the services needed, and the outsourcing provider handles the rest. 

In outsourcing is, you only pay for the services you need when you need them. For example, say you have a software development project you need a developer to create for you. You wouldn’t want to hire a full-time developer on staff to complete it, as once the project is complete, you no longer need the developer.

You surely wouldn’t want to keep paying the high salary for a developer you don’t have work for. Outsourcing allows you to pay for the services you need, and that’s it. 

Human Resources Costs

While we’re on the employee topic, you want to remember the time and cost it takes to headhunt. Finding quality skilled workers is getting even more difficult nowadays. It gets costly to post help-wanted ads online and pay the salaries of experienced recruiters to find the right people.

It’s also time-consuming to create job descriptions, post ads, sift through applications, conduct interviews, hire, onboard, and train employees. It can be downright exhausting and frustrating at times too. 

When you outsource, you simply interview a provider to ensure they have what it takes to handle your tasks successfully, and they take it from there. So, you save the time and money it takes to find and hire employees. You also avoid the cost of training new employees to get the job done correctly. 

Infrastructure Costs 

Let’s face it; more employees translates to more workspace needed. The cost of operating an office seems to increase every year and is breaking the bank of many businesses. Outsourcing frees companies from expanding their office space as they scale to avoid increasing rent and operating costs.

Hidden costs of outsourcing are all of the extras a company needs to buy to ensure a smooth-running office. Office supplies such as desks, chairs, copy paper, and ink add up. 

Not to mention the occasional food and drink for events to keep employees happy and the culture alive. When you outsource, you avoid all those extra expenses.

Technology and Equipment Costs

Almost every business function involves some kind of technology. Some tasks require specific software or equipment to complete. Unfortunately, most technology, software, and equipment come at a high cost.

Outsourcing alleviates a business from needing to invest in expensive tools to complete its essential tasks. The outsourcing provider is responsible for purchasing and maintaining the technology and equipment needed to get the job done.

Other Benefits to Outsourcing

OK, pretty clear outsourcing is an excellent business strategy to reduce cost. But, how else does outsourcing benefit a business? Let’s take a look.

Improved Efficiency

Outsourcing is hiring another company to complete work for you, but more importantly, it’s putting the tasks in the hands of professionals with the specific expertise you need. Outsourcing allows you to prioritize and choose what you want to handle in-office and which jobs would be best to send off.

When you outsource to the right provider, you can ensure the work will get completed accurately and as efficiently as possible. You avoid going through any trial and error as an experienced outsourcing provider has already done that. 

Increased Productivity

Outsourcing an all-hands-on-deck approach to running a business. Being able to pass the torch as tasks come up and completing them without taking up a lot of time from your internal team is an excellent way to maximize productivity.

Access To Higher Skill Sets

In business, you have a project that needs a specific skill to complete successfully. Sometimes it’s not feasible to hire the expertise on staff. Outsourcing gives companies higher skill sets at a fraction of the cost.

Improved Focus

Running a successful business involves many moving parts and a ton of duties and responsibilities daily. With so many tasks needed to get done, it often leaves employees needing to multitask, which isn’t productive.

Having an outsourcing provider focus on specific tasks frees up your in-office team to focus on the core business functions to ensure they get the proper attention. Outsourcing also allows business leaders time to focus on growth strategies, improving processes, and creating innovative products.

Better Work-life Balance

There’s no denying running a business sometimes feels like you’re running on a hamster wheel and can’t get off. Getting everything completed while maintaining a healthy work-life balance is not easy. 

Hiring affordable help from an outsourcing provider allows business leaders to get the essentials done successfully without working around the clock.

Scale

Growing your business is awesome, but with growth comes an increase in work that needs to get done. The beauty of outsourcing is you can scale with ease if you choose the right outsourcing partner that can scale with you.

Choose an outsourcing company with the resources to handle however much workload you throw their way. As your business grows, you simply send more work to your outsourcing partner and consider it done.

How to Outsource to Reduce Business Costs Successfully?

Yes, outsourcing has some awesome benefits for a company, like reducing business costs, but you must take the proper steps to ensure things go right. There are some tried and true practices for outsourcing effectively. Let’s go over the best practices for outsourcing to ensure its success.

Hire the Right Employees

It’s important to know not all business process outsourcing companies are created equal, and not all are right for your company. You want to hire an outsourcing provider with the experience and expertise to complete your tasks successfully.

It’s just as important to work with a company you can communicate with easily. Miscommunication has caused many partnerships to go sour and many projects to go wrong. You want to choose an outsourcing provider you can confidently pass work off to and know they understand your needs and deliver the product without fail.

Depending on what business functions you outsource and how much work a company will handle for you, you might want to choose an outsourcing provider with similar company culture as yours. For example, if you outsource your customer service functions, you’ll want a provider to model your company culture to help build strong relationships with your customers.

Some projects require a specific license or certification to do the work. If so, be sure you hire a company with the requirements needed. Other projects might involve certain laws or compliances. In those cases, be sure you choose a company that understands what’s required to complete the project lawfully.

Be Clear With What You Need

Unless you partner with a mind reader, you want to be super clear about your wants, needs, and your vision for the end product when hiring an outsourcing provider to complete work for you. 

Even if you hire a company with tons of experience, don’t expect them to know what you want out of the project. Be transparent and detailed with instructions, what you expect the end product to look like, and how you want it to function.

When you are clear about your needs and the company fully understands what you want, they’re more likely to successfully deliver the perfect product and satisfy your needs. It helps build a great relationship with the provider that you can utilize long-term to complete business tasks.

Lay Down Clear Expectations 

When you hire an outsourcing provider to complete business functions, you want to discuss your expectations from the beginning. Both parties must understand how things will go and what’s expected to ensure things go right.

You want to discuss turn-around times for some projects, including key milestones. You’ll also want to go over how and when you will communicate and receive updates. Some outsourcing providers use project management software. You’ll have access to receive updates and view progress when you want.

When both parties know what to expect, it more often results in a happy and satisfied working partnership. So, discuss your expectations upfront to give the outsourcing provider a good chance at delivering happiness.

Contracts In Writing

You want to get everything in writing in a contract to protect your company and project. The contract should outline the details of the project, expectations, timelines, and costs. The contract will help both parties ensure the work is done as expected.

It’s important to note, don’t choose a company solely on cost. Cheaper isn’t always better, and your business is on the line, so the stakes are high. Hire an outsourcing provider that can get the job done successfully for a fair price. 

Be Open to Suggestions

When hiring an outsourcing provider that specializes in a specific task, remember they’re the experts in that thing. Don’t try to act like you know it all. Be open to hearing their suggestions and consider their experience and expertise.

We all have our specialty, so it’s best to listen and sometimes learn as you might end up with a better product than you even envisioned. Don’t point fingers and jump to conclusions when things don’t go as initially planned. Remember, this is a partnership, and both parties want a successful outcome.

Conclusion

Outsourcing is an excellent business strategy to improve efficiency, increase productivity, and reduce costs. Improving your business's bottom line is awesome, and outsourcing will help you get there. You can outsource as little or as many business functions as you want. Almost every business function can get outsourced successfully.

You must choose an outsourcing provider that is right for your business and project. Ensure the company has what it takes to get the job done correctly and in the time you need. You want to choose a company that can deliver quality products for a fair price so you can scale your business while reducing costs. 

Are you ready to outsource tasks to reduce business costs? If so, contact Awesome CX today. 

Sources:

The Costs Of Training New Employees, Including Hidden Expenses | Forbes 

You Can't Multitask, So Stop Trying | HBR

10 Small Business Functions That Can Be Easily Outsourced | SBA