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Outsourcing: the basics

Outsourcing in a nutshell

Outsourcing is quickly becoming a key solution for businesses.

It can be an essential ingredient in a company’s success, helping to run operations, complete projects and react to market demands quickly.

What is outsourcing?

For over a thousand years, Japanese fishermen have employed cormorants to catch fish.

By working with the fishermen, the birds are rewarded with a share of the fish. A win-win arrangement. It’s even believed that the birds can keep an approximate tally of the fish caught. If they feel shortchanged, they’ll simply stop helping. They’re no bird brains!

Nice, but what on earth has it got to do with outsourcing?

Well, like the fishermen, businesses understand that people who are experts in their fields are much better at some tasks than they will ever be. So they employ them, just like the fishermen use cormorants.

When a business ‘outsources’ a job or activity, it hires a person to do a task that was traditionally carried out in-house. But for all sorts of reasons, a company isn’t able to do it themselves.

Why do companies outsource experts?

Previously, a lack of cash to invest in their own specialist staff was a main driver behind a company’s decision to outsource.

But now many companies are seeing the benefit of hiring external people as a strategic business move.

By doing this, it opens them up to accessing world-class talent and capabilities, which wouldn’t have been available to them otherwise – that outsourcing is an opportunity, rather than a necessity.

Here are some reasons why a business might outsource:

  • Reduced operating costs – this is often cited as the main reason why a company outsources. It’s a way of turning fixed costs into variable costs – as you only pay for what you need. Particularly if you’ve got a project with an end-date, outsourcing some skills can work out cheaper than hiring more people.
  • Focus on core values – how much better can you focus on a job when you’re not worrying about a hundred other things? It’s the same for a business too. If workers can concentrate on a particular task in hand without worrying about business operations, it frees them to focus on finishing projects and company growth.
  • Gain access to expertize – a company might not be able to afford its own IT technician, or have enough work to justify hiring one full time. By outsourcing this role though, a business can access a highly skilled technician, as and when they need them. It saves time and money building and training a whole department.
  • Improves output quality – with staff focusing on their core tasks, the quality of what they produce is often much higher. Here is where companies use the outsourcing of certain operations and tasks as a strategic move. With this in mind, it pays for itself – as quality improves, so does revenue.

What do companies outsource?

So, now we’ve established why a company might outsource, what kind of work typically falls into this category?

This could be anything and everything, from…

– Accountants

– Legal services

– HR and recruitment

– IT

Reception services

– Telephone support

…to more specific areas of business, such as marketing:

– Public relations

– Graphic design

– Website maintenance

– Copy writing

And shorter-term things like:

– Project management

– Stakeholder engagement

– Sales executives

For small businesses in particular, it can level the playing field and open them up to a whole world of easily employable expertize.

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