Outsourcing is the process of delegating a company’s business process to third parties or external agencies, leveraging benefits ranging from low cost labor, improved quality to product and service innovation. When outsourcing transgresses national boundaries and is managed by companies located in other countries, outsourcing takes the form of offshoring.
A hotly debated topic with pros and cons, both outsourcing as well as offshoring have a direct impact on a company’s top and bottom line and have become key components of defining how successful enterprises are run. Given below, as reflected by companies, are the top 10 reasons to outsource:
- Lower operational and labor costs are among the primary reasons why companies choose to outsource. When properly executed it has a defining impact on a company’s revenue recognition and can deliver significant savings
- Companies also choose to outsource or offshore so that they may continue focusing on their core business processes while delegating mundane time consuming processes to external agencies
- Outsourcing and offshoring also enable companies to tap into and leverage a global knowledge base, having access to world class capabilities
- Freeing up internal resources that could be put into effective use for other purposes is also one of the primary benefits realized when companies outsource or offshore
- Many times stranded with internal resource crunches, many world class enterprises outsource to gain access to resources not available internally
- Outsourcing, many a time is undertaken to save costs and provide a buffer capital fund to companies that could be leveraged in a manner that best profits the company
- By delegating responsibilities to external agencies companies can wash their hands off functions that are difficult to manage and control while still realizing their benefits
- Outsourcing and especially offshoring helps companies mitigate risk and is also among the primary reasons embarked upon
- Outsourcing also enables companies to realize the benefits of re-engineering
- Some companies also outsource to help them expand and gain access to new market areas, by taking the point of production or service delivery closer to their end users
To summarize among the reasons to outsource, companies undertake outsourcing and offshoring for a variety of reasons depending upon their vision and purpose of the exercise. While this may vary from company to company, the fruits of labor are visible among some of the leading enterprises world wide, where in outsourcing and offshoring have become a core component of day to day business strategies.