Remember that time you were going to learn to play the piano? Now, 15 years later, you can barely play Chopsticks. That’s an example of an investment that didn’t pay off. If poor payoff in a big investment is something you want to avoid in business, it might be a good idea to consider outsourcing.
Running a business takes a considerable amount of decisions from hiring to marketing. One of the many choices corporations must make is whether or not to outsource job tasks to a third party. Why pay others to do what could potentially be done in-house? Deciding to outsource involves many factors. Sometimes hiring well-trained professionals or training people to accomplish a task within a business takes more time and money than just hiring elsewhere, and the effort in training for insourcing doesn’t always pay off. The business market is increasingly more competitive; contracting outside sources is one way to help companies prioritize core objectives to keep things running smoothly.
Not that everyone wouldn’t love a family member slaying the Wedding March on the church organ at a wedding, sometimes it’s better to hire a professional musician so you can focus on making the big day special. Outsourcing allows businesses to focus on their core model while specialists can pick up the burden of certain tasks that deplete the efficiency of their business as a whole. It is especially beneficial for small businesses which simply lack the man power.
Often the task that is outsourced is not one that requires full-time employees, and the training investment required cannot justify the job as temporary position. By hiring specialist in a field, time spent on researching, decision making on non-core functions, and managing complications is freed up to allow the business to focus on what makes it profitable and successful. Specialists hired for a task also take care of their own updated training to stay abreast of the latest innovations needed for a job. The productivity benefits alone justify the need of a company to seriously consider outsourcing for certain objectives. Let’s consider the bullet points.
- Allows greater efficiency of staff since the focus is not on outside tasks
- Less risk is taken since the research, equipment, and training is done elsewhere
- No specialized employees are needed in areas where specialists are scarce
One of the biggest reasons a company might decide to outsource is financial reasons. By electing to hire outside vendors to meet certain needs, a company can reduce operating costs as the equipment and training for the task is no longer on the shoulders of the owners. The time not training current staff means that less money is being dumped into labor costs; business can go right to experts. The need to house both employees and necessary equipment is eliminated which spells financial relief for a business. This cost reduction in other areas allows more freedom to spend elsewhere which can increase productivity or profit, including investing in good employees and maintaining a competitive edge on the competition. Cost avoidance of technologies, training, and specialized personnel can save the company both the initial investment and the upkeep – a penny saved is a penny earned.
- Reduction in the cost of equipment expenditures
- Less labor spent on training and housing specialized employees
- Less financial risk involved
A Business Strategy
With outsourcing comes a unique set of strategic advantages. The networking opportunities that come with outsourcing mean that a company can create a competitive edge as they work closely with experts in their field in areas outside of their core business. In addition, businesses can use their networking power to connect other businesses. Scratching backs of leaders in their field can create more opportunities for investment and marketing. While a third party vendor is handling a particular task for a business, the company can stay engaged in maintaining their edge as new technologies and information create the need for adaption. By outsourcing, a company avoids the risks associated with tackling a specialized task and falling short.
- Networking opportunities to help growth and relationships
- Marketing tools
- Allows for company to focus on their core objectives to keep driving business forward
While those five piano lessons were at one time a great idea, they didn’t really pay off. The same is true for some businesses in the decision to insource or outsource. When considering if outsourcing is worth it, it’s important to weigh the task and costs. There are numerous benefits which explain why the concept has been growing rapidly in popularity in the last few decades. While it is not ideal or necessary for all types of businesses, it is something to consider as a potential positive for a business. Listed below are a few articles which illuminate some of the most promising benefits of outsourcing.
- Top Outsourcing Advantages, by James Bucki
- Benefits of Outsourcing, by Benefits Of
- The Benefits of Outsourcing, by Walter Block and Brian Bolan
And check out our video on outsourcing: