Outsourcing is a practice used by businesses to employ staff externally, or through an outside supplier. Companies may outsource a variety of tasks and functions for a number of reasons, such as to save costs, to increase focus on more important competencies, and to attain a variety of outside expertise.
Outsourcing has been a common practice for businesses in recent years. Deloitte’s 2016 Global Outsourcing Survey found that 72% of respondents in the IT industry and 63% of respondents in the legal industry currently outsource. 59% of respondents were also reported to be using outsourcing as a tool for costs cutting, and 57% as a tool for enabling focus on core business.
So what advantages does outsourcing have on companies as opposed to internal staffing? While internal staffing does offer the benefits of control and continuous employment, outsourced contractors are beneficial in particular circumstances.
As mentioned above, for 59% of respondents, the core reason behind their decision to outsource is based on cost savings. By outsourcing staff, employers are able to save costs as work is completed during a concentrated, agreed amount of time.
Additionally, money that would otherwise be spent on onboarding new employees can be saved. An onboarding process involves training, continuous payment, vacation & sick leave arrangements, and more. While the process of onboarding is beneficial for particular roles, it may be unfavourable to onboard employees completing simple, isolated tasks. In these circumstances, where it is unknown as to whether the work will continue after the particular project, it is particularly convenient to onboard.
When outsourcing, a business is also able to save on costs when it comes to equipment, since a freelancer or contractor will have any necessary tools or equipment, and will cover that expense.
When employers outsource tasks that are not a core function of the business, internal staff are able to spend more time focused on tasks that are vital to the company’s success. ‘An outsourcing partner sells focus’ and is able to reduce the workload for internal employees and allow them to focus on more important, core tasks that will drive the company forward.
Outsourcing also removes distractions from internal employees, and reduces the amount of fluctuation which can occur when the work demand is varied.
Another advantage of outsourcing employees is the fact that the company will be able to gain access to external knowledge, such as information relating to new technology, and outside expertise. This is especially advantageous when competing with larger companies, as your business will have insight into the current market, and how work is currently being performed at other companies (of course, subject to the rules surrounding intellectual property).
Finally, an outsourced staff member would benefit your business by providing specific expertise and a deeper understanding of the relevant topic. An external contractor will have a significant amount of experience when it comes to the project at hand, due to the multiple projects he or she has previously worked on. This will be of benefit to your business as the job will be completed effectively.
Things to consider
When determining whether to outsource employees, it is best to consider the type of job that the external employee will be working on. If the job is likely to be a continuous one, it may be more advantageous and less costly to hire an employee traditionally. However, if the job is a one-off project that is unlikely to continue, outsourcing may be the more beneficial option.
Another thing to consider is the fact that the outsourced talent will not be 100% dedicated to your company alone, and may also be contracted to work with other companies. The key to a successful business relationship with an outsourced talent is to accept that they will not have similar vested interests in the company, and be aware that they may not make decisions based on the company’s goals.