Many organizations from different parts of the world are outsourcing work these days. Opening up of the economies has made outsourcing accessible to companies all over the world. Businesses in the developed countries regularly go for offshore outsourcing, thus taking advantage of lower labor costs and convenient currency exchange values.
Outsourcing is also beneficial to less developed countries like China, India, Philippines as well as countries of Eastern Europe. Incoming work of outsourcing creates increased wages, job opportunities, education and a higher quality of life for these countries.
How It Helps
Initially, outsourcing was simply seen as a way to cut costs. Processes like manufacturing and assemmbly used to be managed in overseas locations, where the costs were significantly lower. Wages and operating costs were also lower in these locations. However as outsourcing continued, companies identified several other advantages. These include having experts from different streams being accessible for specialized work, a larger number of workers and more flexibility. Let us examine these options one by one.
As we saw earlier, cost reduction is still the most important reason a company considers outsourcing. Tasks that are costlier to get done in-house are allocated to service providers who can offer the same services at a lower price. For instance, let us take a task that requires specialized training in some software. It might be cheaper for a company to outsource this task than training staff in-house. It does cost the company to hire an expert team from outside, but since this team accomplishes the task much faster and more efficiently than an in-house team, the long term benefits would be with hiring.
Enhancing Competitive Advantage
Outsourcing provides companies with more opportunities to develop competitive strategies for the global market. It also helps to increase product qualitiy, lower costs for the firm and/or consumer or leverage the quality to cost ratio. There are some situations where the quality goes down a little along with lowering costs. Even this situation is beneficial, as the overall productivity increases.
Access to Experts
Having access to experts not only lowers the long term costs, but the company can also explore new avenues and take up more different kinds of specialized work. This in turn helps the company to enjoy greater prosperity through the changing times.
The flexibility comes in several ways. For one, the company has at its disposal a larger workforce, without having to maintain a large workforce with it permanently. Companies can have more people on contract basis and do not have to worry about lay offs. This way companies can adjust their work capacities according to the changing requirements and trends in the market.
Further, outsourcing also equips companies to handle contingencies like unexpected delays, errors or changes in plan. Thus they can complete the projects in time to the satisfaction of their clients.
More Resources for Core Business Activities
With outsourcing, companies can free up their capital funds and time to focus on core business activities. The management can get administrative or other ancillary jobs done through the vendor.
Access to Latest Technology
When a company ties up with an outsourcing vendor, it gains access to the latest technology and equipment at the vendor's disposal, without having to purchase these equipments and technologies.
More Business Partners
In a good outsourcing relationship, the vendor works as your partner, sharing in your desire to take your company to its maximum potential. Thus you gain access to a network of active business partners through outsourcing.
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