Outsourcing is an established way of doing business today,
allowing companies to maximize their budgets and resources
— and generate better products.
Also referred to as subcontracting, outsourcing simply means
acquiring a product or service rather than producing it
in-house. Outsourcing is suitable for just about any industry.
In the administrative field, for instance, a variety of
activities can easily be farmed out to a subcontractor,
including word processing, data entry, transcribing, research,
contact management and event planning.
Outsourcing is extremely common practice within human resource
(HR) departments. In fact, two-thirds of HR departments
outsource at least one activity, according to research by the
Bureau of National Affairs, Inc. and the Society for Human
Resource Management. The top five outsourced HR activities
are employee assistance/counseling, flexible spending account
administration, pre-retirement counseling, outplacement services
and pension/retirement plan administration.
Weighing the Outsourcing Option
When deciding whether outsourcing is a viable option, a company
should consider all of the issues involved. Should the projects
be kept in-house because they’re critical and employees need to
know how to do them themselves? Also, does the company have a
sourcing plan, staff members to oversee contracts or a philosophy
that supports the outsourcing initiative? If it does, outsourcing
may be ideal for your business. The bottom line is every business
is different and companies should carefully weigh the benefits
of outsourcing.
Benefits of Outsourcing
Many companies that choose to outsource do so because they don’t
have or can’t attract the people skills they need. Subcontracting
gives them access to a much greater pool of resources. It also
enables companies to cut cost by 10 to 30 percent, depending on
the industry. They can purchase services on an as-needed basis,
instead of maintaining a full-time employee. This allows them
to avoid paying employee-related expenses such as salaries,
unemployment taxes, paid vacation and sick leave, insurance —
which results in a lower overhead.
In another aspect, outsourcing can help a company focus on its
core business, creating a competitive advantage within its
industry. Subcontracting also affords the business the chance
to get the best job possible from the people it hires. By using
a third party supplier, a company has more room to be critical
of the kind of services provided. If the work is done in-house,
company ties may interfere with the final product.
Outsourcing also offers a wide variety of other benefits,
including:
· Faster setup of the function or service
· Acquire innovative ideas
· Increase commitment and energy in non-core areas
· Improve credibility and image by associating with superior
providers
· Greater flexibility and ability to define the requisite
service more readily
· Less dependency upon internal resources
· Greater control of budget
· Greater ability to control delivery dates
· Increase flexibility to meet changing business conditions
· Purchase of industry best practice
· Generate cash by transferring assets to the provider
· Gain market access and business opportunities through the
supplier’s network
· Turn fixed costs into variable costs
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