Welcome to Third party
What Is Outsourcing? Beginers Guide
October, 2024
Have you heard about outsourcing before? Most likely yes.
In simple terms, outsourcing is simply hiring a third-party company to take care of certain tasks or services instead of doing them in-house.
But why would a company choose to do that? There are many reasons why a company can choose to outsource, like cost savings, efficiency, and the power to delegate and focus on core activities, but let’s dive a little deeper into outsourcing with this post.
Key Topics:
- What Is Outsourcing?
- Benefits Of Outsourcing
- Forms Of Outsourcing
- Cons of Outsourcing
- Real-Life Examples Of Outsourcing
- Conclusion
¿What Is Outsourcing?
An extra set of expert hands 🤝
As explained before in the introduction, outsourcing is contracting specific tasks, functions, or processes to an external party rather than handling them within your organization. This really can be anything from customer service and IT support to marketing, accounting, or even manufacturing. The goal is to delegate, preferrably to a specialized provider or firm, either domestically or internationally.
¿But What's The Benefit Of Doing This?
Unlocking Benefits 🪙
As explained before in the introduction, outsourcing is contracting specific tasks, functions, or processes to an external party rather than handling them within your organization. This really can be anything from customer service and IT support to marketing, accounting, or even manufacturing. The goal is to delegate, preferrably to a specialized provider or firm, either domestically or internationally.
1. Cost Savings 
:
lower labor cost: Outsourcing can lead to significant savings on salaries, benefits, and overhead costs associated with hiring full-time employees.
Cut operational cost: Companies can save on expenses related to infrastructure, technology, and training by outsourcing specific functions.
2. Access to Expertise
:
Specialized Skills: Outsourcing allows businesses to tap into the expertise of specialized providers who are skilled in specific areas, such as IT, marketing, or customer service.
Latest Technology: Outsourcing firms often have access to advanced technology and tools, which can enhance efficiency and productivity.
3. Increased Efficiency
:
Faster Turnaround: Outsourcing can lead to quicker completion of tasks and projects, as specialized providers are often more efficient in their operations.
24/7 Operations: Many outsourcing firms operate around the clock, enabling businesses to provide continuous support or production.
4. Scalability & Flexibility
:
Easier Scaling: Outsourcing allows companies to quickly scale operations up or down based on demand without the complexities of hiring or firing staff.
Adaptable Resources: Businesses can adjust the level of outsourced services based on changing needs, seasonal demands, or market conditions.
: Increased concentration: By outsourcing non-core functions, companies can focus their resources and efforts on their main business objectives and strategic initiatives.
Focus on innovation: With more time to focus on core activities, companies can drive innovation and improve products or services.
In this specific post, we will highlight the most important factors why a company would decide to outsource, but the benefits and reasons aren’t limited to these. You are able to see more about outsourcing on our education page (click here).
1. Cost Savings 💵:
There are two major ways where outsourcing can lead you to save on operational cost
- lower labor cost: Outsourcing can lead to significant savings on salaries, benefits, and overhead costs associated with hiring full-time employees.
- Cut operational cost: Companies can save on expenses related to infrastructure, technology, and training by outsourcing specific functions.
For more detailed information on cost savings, check out our dedicated cost-saving blog here.
2. Access to Expertise📚:
- Specialized Skills: Outsourcing allows businesses to tap into the expertise of specialized providers who are skilled in specific areas, such as IT, marketing, or customer service.
- Latest Technology: Outsourcing firms often have access to advanced technology and tools, which can enhance efficiency and productivity
3. Increased Efficiency🏃♂️💨:
- Faster Turnaround: Outsourcing can lead to quicker completion of tasks and projects, as specialized providers are often more efficient in their operations.
- 24/7 Operations: Many outsourcing firms operate around the clock, enabling businesses to provide continuous support or production.
4. Scalability & Flexibility👆👇:
- Easier Scaling: Outsourcing allows companies to quickly scale operations up or down based on demand without the complexities of hiring or firing staff.
- Adaptable Resources: Businesses can adjust the level of outsourced services based on changing needs, seasonal demands, or market conditions.
5. Focus on Core Business Activities🧠:
- Increased concentration: By outsourcing non-core functions, companies can focus their resources and efforts on their main business objectives and strategic initiatives.
- Focus on innovation: With more time to focus on core activities, companies can drive innovation and improve products or services.
¿What are The Forms Of Outsourcing?
Far, Near, Here 🌍
There’s 3 common ways to differentiate the type of outsourcing, specifically focusing on geolocation, that brings within itself a bunch of important factors like language & cultural affinity, time zone, politics, and more. They are referred to as offshoring, nearshoring, and onshoring
Offshore
Is simply the fact of hiring a company or individual in another country, usually for cost savings due to lower labor costs.
Examples: Philippines, India, Vietnam.
Nearshore
Compared to offshoring, nearshoring focuses on contracting services to nearby countries, often balancing cost savings with closer time zones and cultural similarities.
Examples: Dominican Republic, Mexico and Colombia.
Onshore
Outsourcing to a provider within the same country for easier communication and coordination. It can be better in quality but it can’t generate the savings compared to the other two
There’s 3 common ways to differentiate the type of outsourcing, specifically focusing on geolocation, that brings within itself a bunch of important factors like language & cultural affinity, time zone, politics, and more. They are referred to as offshoring, nearshoring, and onshoring.
Offshoring:
Is simply the fact of hiring a company or individual in another country, usually for cost savings due to lower labor costs. Examples: Philippines, India, Vietnam.
Compared to offshoring, nearshoring focuses on contracting services to nearby countries, often balancing cost savings with closer time zones and cultural similarities.
Examples: Dominican Republic, Mexico, Colombia.
¿What To Worry About Outsourcing?
Outsourcing Done Right✅
Again, we will be mentioning the top things to be worried about when outsourcing, but we are elaborating on a dedicated post that will touch on everything and go into more detail. Here they are:
Quality Control:
- Worry: Concerns about the quality of work may not meet your company’s standards.
- Solution✅: Set clear expectations and performance metrics in the contract. Regularly monitor the work through reviews and quality audits to ensure standards are maintained.
Communication Challenge:
- Worry: Miscommunication due to different time zones, languages, or cultures.
- Solution✅: Establish clear communication channels and protocols from the outset. Use collaboration tools like Slack or Microsoft Teams to facilitate live updates and discussions.
- Worry: Feeling that you are losing control over important business functions.
- Solution✅: Maintain oversight by setting up regular check-ins and an outsourcing partner that gives you regular feedback. Involve your internal team in the outsourcing process to ensure alignment with business goals
- Worry: Concerns about the protection of sensitive data and intellectual property.
- Solution✅: Ensure that your outsourcing partner has robust security measures in place. Include confidentiality clauses in contracts and conduct regular audits of their security practices.
- Worry: Language Barrier & Potential misunderstandings arising from cultural differences.
- Solution✅: Set a level of english profficiency based on the Common European Framework of Reference for Languages (CEFR) & make sure your outsourcing partner provides cultural training for your outsourced team.
Here Are Some Real Life Examples
The Power Of Outsourcing💪
Here are 3 well known companies that are known for being leaders in their industries and have used the power of outsourcing:
Microsoft
Microsoft has outsourced certain aspects of its customer support and software development to third-party companies in countries like India and the Philippines. This strategy helps them manage costs while providing 24/7 support to users
Dell
Dell has outsourced its customer service and technical support to various countries, including India. This allows Dell to provide around-the-clock support while managing operational costs effectively.
Apple
Apple outsources its manufacturing to companies like Foxconn and Pegatron, primarily located in China. This allows Apple to benefit from lower labor costs and high-volume production capabilities while focusing on design and innovation.
Conclusion
Outsourcing is a game-changer for businesses looking to save time, cut costs, and stay focused on what they do best. Whether it’s nearshore, offshore, or onshore, choosing the right outsourcing model can help your business grow faster and smarter. Ready to see how outsourcing can make a difference for you? Let’s get started!
Connect with us3️⃣:
Have a member of our team help you in discussing how outsourcing can benefit your company. We help you deliver excellent customer care, maximizing profits, and minimizing costs.
Send us a message
We would love to discuss any inquiries with you.