Business outsourcing has surprisingly become more common for small and medium enterprises than for larger organizations. More so, in these tough times when many businesses have been forced to operate remotely or from home, outsourcing tasks to remote workers has become even more common. It has become a trend for businesses from all industries to look for outsourcing opportunities, and save their operating costs.
Despite all the disadvantages of this ongoing pandemic, many businesses have been able to cash on the positive side of it by turning themselves into outsourcing firms. Through digital marketing techniques, SMEs have been able to get in touch with skilled workers from different parts of the world and hire them at reasonable rates to perform specific tasks.
If you are also running a business and want to reap the benefits of outsourcing services, you first need to learn how outsourcing works.
How Does Business Outsourcing Work?
The way business outsourcing works is that there is an outside company, which is a service provider (also called a third-party provider). This company arranges for the staff or systems to perform the job or services that an organization appoints it for. The company offers these services either on-site, in its own office, or at the hiring organization’s facilities, depending on the agreement between the two firms.
Business outsourcing is done by companies these days for some job scopes or services. Sometimes, an entire department or a complete area of business operations is outsourced to an external firm. Examples of some services that are commonly outsourced include programming or website development, customer service, and call services, manufacturing processes, financial functions like bookkeeping or payroll processing, and human resources tasks.
Business outsourcing is sometimes also referred to as business process outsourcing or contracting out services. In some cases, the outsourcing firm is larger while the outsourced firm is relatively smaller in size. But sometimes, businesses like to explore outsourcing opportunities to work with very large and popular third-party providers, such as hiring IBM to manage their IT services or hiring FedEx Supply Chain to provide logistics services.
Another form of business outsourcing is hiring individuals to perform smaller tasks that are part of the outsourcing firm’s particular departments. These individuals are either professional freelancers who have a website of their own, temporary office workers, independent contractors, or just currently working remotely due to the global lockdown situation.
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For an outsourcing firm to effectively make use of its outsourcing opportunities, it is important to make the agreement carefully and deal with the service provider mindfully. The focus should not only be on the logistics, but also the communication and relationship between the two firms. If the business relationship is managed properly, productivity is enhanced by default. That’s why the agreement between an outsourcing firm and the third-party provider should be taken as a trusted partnership, not as a purchasing project. If organizations function like this, business outsourcing would always work out perfectly.
In the contract or agreement, perhaps some focus needs to be put on the exit clause so that if things don’t turn out well, the strategic partnership can be ended with ease and peace. It is also important for both entities to be aware of when the agreement is going to time out or expire so that both of them can be diligent in fulfilling their obligations while the contract is still ongoing.
6 Key Benefits of Business Outsourcing
Here are the 6 key benefits of outsourcing for small businesses.
1. It Helps You Save Operational Costs
When you outsource part of your services to a third-party firm, they are most likely going to work on those services in their own office or facilities. This means your business will be able to save on the operational costs of delivering those services.
If you get your in-house staff to deliver those services, along with paying salary to your employees, your office utilities, facilities, and systems will also be used during the process. An outsourcing firm can negotiate its terms in a way that the total cost of business outsourcing turns out to be less than working on the outsourced services itself, within its premises or facilities.
2. It Allows You to Get Specialized Services
Third-party service providers are often very specialized and professional in the services that they offer. At times, it is beneficial for a business to outsource a complete department to an outsider firm because that firm would be more focused on those specific tasks. If you outsource your IT department, for instance, the outsourced firm would be better equipped with all the tools, software, and systems to provide those services to you. Not only that, but it will also have staff who possess the specialized skills that are required to do your IT-related work. This is among the biggest benefits of outsourcing services.
For certain companies, most of the work of their IT department is web designing, web development, and web maintenance. If they choose to use business outsourcing for their IT, the outsourced firm will have staff that has more programming knowledge and coding skills and is also more equipped with website building tools and platforms to ease the job.
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3. It Opens Up Business Expansion Opportunities
For using business outsourcing effectively, the outsourcing firm needs to build a large professional network around it. Only then can it select the most appropriate and reasonable firm to outsource services to.
When a business is actively involved in networking, it opens itself to expansion opportunities. It gets familiar with the market trends and corporate cultures of other firms. It finds out what is available in the market and what is more in demand. This allows it to try to fill the gaps in the market by diversifying its products and services. For instance, a business selling cosmetics can see an opportunity in the market to introduce a new product line to sell herbal medicines. Another example could be a women’s fashion wear seller who can grab the opportunity to start selling handbags for women as well.
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4. It Lets You Gain Competitive Advantages in the Market
Business outsourcing helps small businesses gain a competitive edge in the market. By outsourcing their supporting functions, they can focus more on their core competencies, and direct all their resources towards them. As they do not have to deal with the activities that they are less skilled at anymore, they can use all their resources and energy in carrying out the activities that they are most competent in. This enhances their efficiency and gives them a competitive advantage over the other players in the industry. To confirm this, the business needs to conduct a competitor analysis from time to time to know where it stands.
5. It Gives a Chance to Your Staff to Learn New Skills
When the staff of the outsourcing firm interacts and communicates with the staff of the outsourced firm, they both have an opportunity to learn from each other. They both possess different types of skills and are competent in different kinds of activities. By sharing their knowledge and work with each other, they can help each other develop new skills and increase their chances of career enhancement.
From a business perspective, business outsourcing helps the outsourcing firm’s staff to become more competent, by letting them get more well-grounded in more skills than they originally had. The firm can now use the existing staff for taking care of more diversified tasks in the future.
6. It Enables You to Continue Your Business Operations During a Pandemic
Last but not the least, business outsourcing is particularly beneficial for businesses to use in times of a pandemic. By outsourcing tasks and services to remote workers, many businesses have been able to continue their operations when their offices and facilities are closed.
There are many applications, software, and tools available these days that enable businesses to effectively and regularly communicate with their remote workers. People working for a company from a different country in a different time zone can easily coordinate with their employers through these applications. This makes business outsourcing easier than ever before. Meetings can be scheduled, work progress can be tracked, documents and files can be shared, and video conferences can be held with the help of such tools.
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Business outsourcing has proven to be particularly useful during this pandemic for service-providing companies. These companies have been able to hire individuals from different parts of the world to deliver tasks that are part of the overall services that they are providing to their clients. This is because there is usually no inventory management involved in providing services.
If you are running a business and want to take on projects that another firm outsources to you, the first thing you need is to have a website to showcase your services. For building a website in just a few hours, create a free account on Strikingly and get familiar with our website templates and website building tools. If you have any queries about our packages or features, you can contact us anytime through the live chat on our site which is available 24/7.