Why Do Companies Choose to Outsource Work?
Outsource is one of those words often mistaken for something negative; however, nothing could be further from the truth. Some of the world’s largest and most successful companies outsource certain services to other companies.
Why Companies Outsource
They do this for many reasons, but, ultimately, the fundamental benefit of outsourcing work lies in the wisdom of knowing that your company has strengths and weaknesses and being unafraid of admitting it.
Take Apple, for instance. On nearly every device Apple creates, you will see a message somewhere in the packaging or the device itself that reads Designed by Apple in California—assembled in China.
What message is Apple sending with this simple two-sentence phrase? For the consumer, they are presenting a message of technological innovation while at the same time remaining transparent about cost controls through outsourced manufacturing. To a wise outsourcing connoisseur, however, they are demonstrating their wisdom.
Apple knows what can be difficult for many businesses, and individuals for that matter, to admit…they know their strengths, and they know their weaknesses. Apple knows that they excel at technological design and innovation. Still, they do not excel at manufacturing their creations, hence their crafty and brutally honest packaging message.
Does Outsourcing Increase Innovation?
We know that you have built your business from the dream up, and much like raising a child, it can be hard to let certain things go. Besides being a very catchy Disney ballad, letting go can be challenging. It can feel like you're releasing control of something you have spent your whole life building, which can be frightening. We encourage you to approach your need for outsourcing from a different perspective.
Maybe you have grown from a small one, two, or five-person company that started in the basement of your home. You now have several dozen full-time employees on your in-house team.
You’ve got a new office and many new operational costs and bookkeeping challenges. That is not a bad thing. Realizing you are overwhelmed with success is a great thing!
If your company finds itself in a position where it needs to outsource, you can look at that position as a very positive one. It means your success has outgrown your means to handle it.
Don’t Be Afraid To Outsource
We know you are waiting on the but, so here it is. But, if you're too afraid to identify and admit your weaknesses, your success will become a double-edged sword and begin to slow and sometimes even reverse course. It takes strength to admit your weaknesses, but your company's success depends on you having that strength.
Identify Your Weak Points Before Outsourcing
Once you identify your weak points and the areas where you excel, you can construct a road map that points you in the right direction for outsourcing. This style of outsourcing is also known as smartsourcing.
You should not outsource something you can do with strength, and by identifying those core competencies, you identify what business functions to retain and what to let go of.
Example of When to Outsource
For example, if your company does not excel in customer support and your customers are becoming impatient or irritated with the help and service, your business will eventually take a hit.
Your success, which has outpaced your infrastructure, will suffer. Customer service is a weakness you should be willing to identify. Once identified, you can begin to take steps to mitigate it. Once in this position, you will have two options.
You can invest in this department of your company and spend time, money, and resources, or you can go the more cost-effective route and outsource it to a company like Awesome CX.
Innovation is much tougher to accomplish when attempted from a position of overwhelming stress and doubt. Letting go of your weaknesses opens up the space for you and your team to focus on making what you do even greater. By letting go, you can take a stronger grip on your purpose.
Does Outsourcing Increase Profitability?
Cost savings and cost control are perhaps the single most identified reasons companies outsource. Let's face it; the bottom line is the bottom line. To keep fulfilling your purpose and innovating, you must be profitable. Quickly identifying services to outsource can help save money and hasten your ability to continue your upward success.
Information technology services are not cheap. This is one area that many companies choose to outsource due to the overwhelming costs involved.
Aside from paying IT professionals hefty salaries (currently, the average is about $77,000 annually in the U.S.) for software development, the infrastructure needed to run your operations smoothly is one of the most expensive parts of scaling a business.
Instead of hiring analysts, software engineers, and managers, you could outsource that area of your business process to a company that provides you with both the infrastructure and expert support for much less than building that division within your company from the ground up.
Outsourcing Helps Retain Key Employees
Employee retention is seen as a significant cost-saving endeavor across all private industry sectors and even government employers. Recruiting, hiring, outfitting, and onboarding new employees are significantly more expensive than employee retention.
It is wise for companies to consistently seek to strike a balance between lower costs and employee retention to mitigate this risk. Your company cannot always answer the demands of employees when it comes to benefit packages and pay simply because the demands are unrealistic.
But finding a balance is essential to retaining high-quality workers, especially your key employees who contribute most significantly to your business' innovation.
One of the easiest ways to do this adds cost savings, and the answer is outsourcing. As we have mentioned, overworked and fatigued employees will lose morale and work ethic, leading to reduced productivity and retention issues.
Outsourcing areas of your business with weaknesses gives you the space to provide a work environment and culture conducive to employee retention.
Outsourcing Allows You Access Global Talent
A tremendous benefit of outsourcing can come in the form of workforce talent. Companies are often limited by the talent pool they can recruit from due to many factors, the least of which being location, location, location.
While the town or city where you founded your company might be heaven on Earth to you, it may lack certain amenities and recourses that job seekers desire. Because of that, you can find yourself limited in your hiring process.
Outsourcing allows you to overcome this obstacle by gaining access to a global talent network. Many companies, especially since the beginning of the COVID-19 pandemic, have joined the remote work revolution.
Subsequently, these outsourcing companies have recruited talented freelancers, independent contractors, and outsourced teams worldwide. Whatever time zone, whether in Los Angeles, California, or Southern Pines, North Carolina, your business can tap into this global network of talent.
How Does Outsourcing Improve Productivity?
Instead of stretching your workforce thin, outsourcing the struggling department and allowing your workforce to remain focused on the goals they were hired for could be a better option. This will assist in maintaining high morale, play a part in encouraging employee retention, and as a result, increase your productivity.
No matter the size of your company, for small businesses, startups, and even tech giants, productivity is hindered when you redirect existing resources to mitigate your limitations.
For instance, you may have a strong department manager who has successfully built a great team and managed that team's expectations. This success leads you to believe that they will also do a great job correcting the struggling department, so you move them to tackle the issues.
Transferring existing resources to overcome obstacles rarely works out in a business' favor and often leads to time-consuming problems. What occurs more often than not is a reduction of productivity across the board.
Your employees and leaders will become overworked, stressed, and as a result, company morale will suffer. Low morale leads to poor work ethic and increased retention issues.
Outsourcing Helps To Amplify Your Business Goals
If you find yourself struggling with a certain component of your business that has nothing to do with your goals, it may be something you need to outsource. Outsourcing these limitations allows you to focus your resources and talents on the mission of keeping your core business on the path to success.
We encourage you to keep your why as a central focus of your operations.
- Why did you dream up this business?
- Why did you decide to take risks and put it all on the line to create your product or service?
- Why does your role in your company give you purpose?
It is important for successful companies to understand and never forget their why because their what will suffer if they do. Some of our world's greatest successful companies have constantly kept their original why at the forefront of their company culture.
Even the military uses this concept to recruit and retain service members. It is crucial to success.
Outsourcing Is Not a Dirty Word
We want to reiterate that outsourcing services smartly and from a foundation of amplifying your business goals can be a very positive step in your company's future success.
At Awesome CX, we have a team dedicated to helping you navigate the uncharted territory of outsourcing. We want to be your partner in success. We realize the concept of outsourcing may feel like letting go of control, and we understand those concerns.
Contact us for an honest discussion on the pros and cons and make an informed decision on what's next for you and your company!
Sources:
Why Do Companies Outsource? | News
Beyond Outsourcing To Smartsourcing | Forbes