Outsourcing is a smart business move. It helps you focus on your core capabilities, while outsourcing other tasks for a fee.
Outsourcing also brings with it another huge financial benefit- with the advent of the internet, you can now outsource literally any kind of work to anywhere in the world. This works out to be particularly profitable if you outsource to a country with a weaker currency. In the last few years, outsourcing to India, China, Philippines and Sri Lanka has picked up in popularity and companies now routinely set up manufacturing, processing and even back-end divisions as outsourced units.
When is the Right Time to Outsource?
Though outsourcing has several benefits, it has its own share of cons too. For one, you are handing over business functions to vendors, on whom you have little or no control. Secondly the quality of work is likely to suffer if the vendor has overextended himself (by taking on more clients than he can handle).
So outsourcing should be considered decision. There are certain times or phases in your business cycle, when outsourcing makes most sense. At other points, outsourcing could end up being a financially non-viable option and could pose financial risks too.
The article looks when you should consider outsourcing so that it offers maximum benefits to you.
1. During Periods of Huge Growth and Expansion
Expansion is a part of all businesses. In order to survive, companies have to expand into other areas or deeper in to their own areas of expertise by acquiring related businesses and/or foraying into newer territories. During this period, it makes sense to hand over certain non-critical tasks to external vendors, so that staff time can be focused on the work at hand. Besides, expansion and growth will lead to a surge in the volume of work and outsourcing is the more cost effective option to handle the extra work load rather than investing in new employee recruitment and training.
2. To Focus On Core Strengths
Not all businesses that diversified into other areas find success. Such businesses may make a decision to re-sharpen their focus on core strength areas and regain their lost market share or glory. This is the perfect time to outsource non-essential functions so that the core employee workload is reduced, and they can use their skills efficiently on core strength areas.
In fact this is one of the most popular reasons for outsourcing. For instance, auto maker Toyota’s core competency is design and manufacture of classic cars. The company outsources secondary functions like accounts, payroll, data-entry, shipping and assembly to other countries.
3. When You Need Temporary Expert Services
If you need a specific skill set for a particular project, it makes sense to outsource that part of the work. The other alternative of training in-house staff for the function is expensive and time consuming. For instance, several businesses print quarterly newsletters and more often than not, the task of creating content and designing the newsletter is outsourced.
4. When You Need a 24/7 Business Model
When you have global customers who can purchase items at any time, it means that your websites and customer support divisions have to be online as much as possible. This is possible only with outsourcing. Countries like India and Sri Lanka are in a completely different time zone, resulting in a 24/7 business model. This consistent service will also mean your customers are satisfied with product delivery and complaint resolution procedures.
5. To Balance Budget and Free Up Revenue
Outsourcing saves a lot of money and cost cutting is a necessary part of business. Companies facing a huge economical burden can easily choose to relocate several divisions to countries with a lower currency rate. According to industry pundits, savings can go as high as 60% due to lower currency rates, lower standard of living and cheap labor in other countries. These savings are ploughed back into the business for expansion and other revenue-producing activities leading to stronger long-term results.
For every company, the right time to outsource is variable. Small companies can choose to do it right in the beginning while larger companies may have to move entire divisions out of country in a slow graduated movement. No matter when the decision is taken, if taken at the right time, outsourcing can streamline a company and provide a range of logistical, personnel and customer support that is invaluable.