Sometimes, the best way to grow a business is to look outside the organization, where you might discover new advantages, such as all the benefits of outsourcing tasks where you struggle.
While it might make sense to establish a skilled in-house team, outsourcing work can be a strategic move, especially as companies face labor shortages and increasing production costs.
Outsourcing is a cost-effective option when your business needs to rapidly scale up market share, staffing, and production. There are many advantages of outsourcing, and if done correctly, it will help you maximize the performance of your staff by making them more efficient and allowing them to focus on their core responsibilities.
Here, we’ll look at eleven benefits of outsourcing work, highlighting how getting external help might be the right choice for your business.
Table of Contents
- 1. Reduce your labor costs
- 2. Improve team efficiency through outside expertise
- 3. Grow on a budget
- 4. Focus on what’s important
- 5. Access to global talent
- 6. International expansion
- 7. 24-hour production
- 8. Increase productivity
- 9. Gain a competitive edge
- 10. Third-party contractors are motivated
- 11. Internal staff development
- Industry-specific benefits of offshore outsourcing
- Final thoughts
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1. Reduce your labor costs
The single most significant cost for most businesses is labor. Salaries constantly increase, and the weekly paycheck doesn’t include the total compensation cost, such as training, health care, travel, and other perks. Infrastructure, technology, and equipment costs can also impact your bottom line.
However, outsourcing can significantly reduce or eliminate many of these expenses. Contractors don’t require a desk or office space; they generally do not receive additional employee benefits. It’s also easier to onboard them as specialists are typically hired for specific roles or purposes.
Here at Hubstaff, we often turn to our pool of contractors to scale up. If a full-time position opens up, we typically consider our contractors first. In this case, outsourcing streamlines the hiring process and creates cost savings. Using anoutsourcing calculatorcan further refine these cost-saving strategies by providing precise estimations of potential savings.
There is built-in flexibility through outsourcing as well — in many situations, you only pay for the work you need. If you have 40 hours of work one week and only 15 the next, you’ll pay only for hours worked. This flexibility will help you better budget tasks or projects while maintaining financial targets.
Outsourcing also allows you to tap into more affordable talent pools — hiring a designer or developer from New York City or Los Angeles will be more expensive, as their cost of living is much higher.
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2. Improve team efficiency through outside expertise
Turning to an independent contractor allows you to hire someone with many years of experience. They will bring expertise to your company and may even improve business functions while introducing new initiatives. That way, you won’t have to break in a rookie or develop a new division within your company, which takes time and money. The experts will help you be more efficient out of the gate, boosting productivity and efficiency.
For example, during the pandemic, e-commerce retail was forced to evolve.
Many of these stores may have had a rudimentary online presence pre-2020. However, with health restrictions, many companies were forced to bolster their online stores on the fly. By going to a contractor or an outsourcing company, they were able to make the transition a lot faster.
When an outsourced service provider had experience in new markets, the e-commerce brands had more opportunities to expand and grow their influence. E-commerce companies have long used offshore outsourcing for production and distribution, but more recently have seen successful outsourcing in marketing, sales, customer service, and other core business practice areas.
3. Grow on a budget
Outsourcing can help entrepreneurs grow their businesses without breaking their budgets.
Take public relations. Some companies, especially those small and medium-sized businesses, do not need a full-time PR or communications department. However, they still need these professionals to help run social media campaigns or handle news media requests on a one-off basis.
Outsourcing to a cost-effective firm that specializes in public relations might make more sense than building your in-house PR team from scratch. You can apply this strategy to human resources, bookkeeping, legal, or other departments that become more crucial as your business grows.
4. Focus on what’s important
As an entrepreneur, you have a goal and vision for your company. You’re an expert in the product you’ve built or the service you’ve developed. So, your focus should be on doing whatever it takes to grow the business rather than administrative tasks.
Outsourcing services allows you to keep your focus on the core business. By contracting out time-consuming, non-core areas of the company, like IT or administration, you can concentrate on more meaningful work that will significantly impact your business operations.
One of the core outsourcing benefits is getting to focus on the tasks, projects, or business processes that you and your team enjoy. That alone helps you tackle hidden costs around burnout and stress while shoring up core competencies designed to keep your operations running smoothly.
5. Access to global talent
It’s a competitive market for skilled labor as companies crank up their recruiting efforts to fill workforce shortages. Both startups and established businesses are struggling with this challenge throughout the entire world.
Scaling up right now is incredibly difficult, and outsourcing can be critical in filling this void, particularly in the short term. Instead of recruiting candidates to relocate to you, you can tap into companies and freelancers worldwide that specialize in the skills you require.
The larger talent pool isn’t filled just with people who live a world away. You can also find folks that live in your own country, state, or even town. They just might be unavailable for full-time work. Outsourcing sometimes means you save costs while building up your local community. Even if your eventual goal is to have a complete in-house team, outsourcing can help you get there quicker by helping you save until you can make more permanent hires. Read about the differences between in-house and outsourcing.
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6. International expansion
Outsourcing can sometimes help expand your company’s reach overseas or into neighboring countries. In this digital world, that’s often among the top business goals, thanks to the latest technology. However, outsourcing benefits make it more possible because they lower costs associated with nearly all aspects of opening foreign doors.
Taking advantage of a remote and global workforce makes gaining access to new markets more accessible and less expensive, especially if you can bypass many infrastructural challenges needed to set up a physical location.
By outsourcing, you can avoid the cost of relocation packages for employees and other expenses, like equipment and rent, when setting up a new office.
7. 24-hour production
A global talent pool means you can overcome the eight-hour workday. A traditional work environment often runs only from 9-5 in your time zone. By outsourcing tasks and with proper planning, there is no reason for production, IT, or customer support to shut down.
By hiring freelancers in other time zones, you can create a 24-hour production cycle. This change means managers can have completed work waiting for them in their inboxes when they start the day. You get projects back to clients faster than ever before.
A shift to 24/7 operations requires a strong outsourcing relationship designed to improve your operations and reach. Don’t limit this work to just offering lower labor costs. Work with your service provider to build up both of your businesses, creating a strong company culture and improving employee satisfaction as you expand.
8. Increase productivity
When your team gets slammed, outsourcing can be a lifeline. Some businesses go through predictable busy seasons; other times, they cannot expand their permanent workforce fast enough to keep pace with demand. Outsourcing can help your employees stay on task when their workloads increase.
There are contractors or freelancers to handle just about every type of work. You can bring them on to pick up responsibilities outside the core scope of your work. For example, suppose your business is ramping up for a social media campaign. In that case, you can outsource this work rather than adding it to the plate of an already busy communications team. This setup allows your professionals to focus on their best work.
Especially in anticipated demand surges, going outside the company can help you cut human resources and benefits administration costs while reducing your reliance on full-time transient team members.
9. Gain a competitive edge
Outsourcing can help small businesses punch above their competitive weight. Companies can maintain a smaller core of employees while accessing resources around the country (or around the globe) that allow them to tap into a higher level of experienced talent or offer more services at a better price than their competitors.
When profit margins are tight, providing better customer service or quicker turnarounds on projects can make a huge difference in client retention or attracting new work.
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10. Third-party contractors are motivated
Outside contractors are motivated to keep you happy. All employees should be, but third-party providers have no security beyond the project you’ve hired them for or the end of the contract.
They’ll lose out on potential client referrals and testimonials if they do sub-par work. So it’s in their best interest to perform at their best.
However, don’t treat outsourcing services or individuals as disposable. Focus on finding people you trust to support core business functions. That way, you’re achieving cost savings while maintaining the reliability of your offerings. Always treat people the way that any person should be treated.
11. Internal staff development
On-site outsourcing can pay dividends beyond just getting a project completed. When you bring in outside experts, it’s an opportunity for your core staff to pick up new skills and perspectives just by working alongside your more experienced hires. Outsourcing is beneficial if you have a younger or developing team.
Also, your staff will be able to better hone their craft by having more time to concentrate rather than being overworked or trying to tackle responsibilities beyond their primary skill set.
Industry-specific benefits of offshore outsourcing
If these eleven benefits aren’t enough to persuade you to take your operations globally, let’s take a look at some industry-specific advantages of offshore outsourcing. Let’s take a closer look.
Benefits of outsourcing IT and call center services
- 24/7 Customer Support. When you open the door to professionals in every conceivable, you can create 24/7 coverage for IT services. This way, your clients can have their questions answered even well outside of normal office hours.
- Cost savings. As mentioned above, 24/7 coverage is crucial in IT. Instead of racking up overtime with internal teams, hiring around the globe helps you create asynchronous shift schedules and find favorable exchange rates.
- Access to specialized skills. The wider the talent pool, the easier it is to find the credentials you need to benefit from outsourcing call centers and IT teams.
Benefits of outsourcing software development
- Faster Time-to-Market. Similar to the 24/7 coverage mentioned in the IT space, asynchronous development teams help you streamline workflows and build better go-to-market strategies for future projects.
- Wider talent pool. Software development, despite growing in popularity, is still a pretty niche skillset with 2.5% of the US population working as developers. It never hurts to cast a wider net.
- Cost efficiency. Development work is scarce for a reason. It requires a niche skillset that isn’t cheap. Looking outside of your country can help you save money and build a larger team.
Benefits of outsourcing customer service
- 24-hour coverage. Much like with IT teams, the best companies have customer service teams available around the clock. It’s a lot easier to accomplish with outsourcing.
- DEI, multilingual needs. If you want your products and/or services to reach a wide audience, your customer support should be equally diverse. Whether it’s e-commerce, real estate, or another field, diversity goes a long way in making customers feel comfortable.
Benefits of outsourcing payroll and accounting services
- Wider knowledge base. If you’re outsourcing work or invoicing overseas clients, you might as well match them with a team that has a diverse knowledge of international payroll, tax compliance, and accounting, right?
- Time savings. Outsourcing payroll frees up time and resources for accounting and payroll services. This allows these teams to focus on core work. When you look beyond the benefits of outsourcing accounting services, time tracking, and employee timesheet tools can come into play here, too.
Final thoughts
Outsourcing is finding the most efficient way to run and grow your business. It’s not perfect for every situation, but there are many advantages to developing and retaining your internal staff.
Hiring contractors can help you handle a wide range of challenges while controlling costs. Outsourcing can help companies discover new markets or help business owners focus on what they do best.
Turning to an outsourcing company may help you build a more robust future strategy without giving up any business process or creating financial risk. One way to achieve this is to ask for your outsourcing partner to use technology that offers robust reporting, like Hubstaff time tracking.
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