How Does Outsourcing Work? And How Can You Benefit?

Outsourcing can be a great benefit to your company. But you need to know how outsourcing works and how to use it to benefit you and your benefit. Finding the balance between having onsite staff and hiring virtual assistants can be a game-changer that can aid a business in scaling faster. Still, first, you need to understand outsourcing.

What Is Outsourcing?

Outsourcing definition: The offloading of services that could have been done in-house but are now delegated to a third party for completion. This third party can be a virtual assistant, a business process company specializing in BPO, or an agency. Business process outsourcing or contracting has become popular in the last few decades, and much of this is linked to globalization and improvements in information communication technologies (ICTs).

Additionally, there is a greater demand to be more competitive, which means finding cheaper labor, which is the main benefit of outsourcing – lower costs.

However, many get confused and frightened by outsourcing as they view it as the bogeyman. But think of outsourcing, as you order food through UberEATS. You outsourced the cooking tasks to a restaurant, and instead of picking up the order yourself, you are getting it delivered to your door.

The same is true when you use a garden service. You could be spending your time cutting your lawn, but you opt to hire a garden service that can do it for you faster and cheaper than what it would have cost you. Remember, cutting grass would cost you a lot of time. It could have been time spent doing company work or with your family, and time is an unrenewable resource. When your time is up, it’s up.

The Different Types of Outsourcing

There are different ways for a business to outsource. The difference depends on the process and which is best for your needs. The typical outsourcing processes are onshoring, offshoring, and nearshoring.

  • Onshoring involves delegating work to a third party in the same country, while offshoring involves offboarding the work to an overseas entity.
  • Nearshoring is delegating work to parties across the border, such as delegating work to a virtual assistant in Mexico if you are based in the United States.

One of the most recognizable outsourcing partnerships is that between Apple and Foxconn. The Apple-Foxconn partnership has outsourced the manufacture of its products, such as its iPhones, iPads, and MacBooks, to the Taiwanese multinational electronics contract manufacturer Foxconn.

With factories in China, Foxconn can produce Apple’s products on scale. Apple focuses on designing, developing software, and marketing its products and services. These are the points that drive growth and help to expand the market. Moreover, this partnership indicates the transformative power of outsourcing and how outsourcing can benefit a company by making it one of the largest brands globally.

The Pros and Cons of Outsourcing

A big driver for outsourcing is the cost-benefit to companies. For instance, depending on the service and location, a company can save between 60% and 80% on business operating costs. This means keeping on salaries, fewer taxes, no need for expensive offices or equipment, and not having to pay staff benefits, insurance, or healthcare taxes. T

Freeing up these resources can then be driven back to the company, which can be a game-changer, especially if the company is in a highly competitive market and wants to scale fast.

Besides the cost savings, another benefit is the boost in productivity. The knock-on effect is more significant revenue growth. This is because the right skills can be hired for each without delays.

Outsourcing, if mishandled, can also have some negative consequences. When hiring freelancers, there is the risk that the talent might not be suitable for the role, which can cause delays and impact your productivity. However, the typical risk is security concerns. This is when sensitive information can be mishandled or misused. Additionally, communication can be problematic. However, these risks, if managed correctly, can be mitigated.

The Bottom Line: How Does Outsourcing Work?

Outsourcing offers many benefits and does have some negative aspects. However, just as hiring onsite staff needs to be managed correctly, you must manage your outsourcing effectively. Partnering with an outsourcing with a good reputation would be your first step to success. Additionally, taking steps to mitigate the negative aspects of outsourcing will help. However, before opting to outsource, weigh and compare the benefits and risks to see if outsourcing would benefit you and your company. 


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