If you’re a regular reader or have binged on some of the older articles you’d have realised that I have written about outsourcing a few times. Outsourcing has risen from an obscure practice that seemed like one of those business buzzwords to standard and even best practice. Our focus today is the benefits of outsourcing. Some of them may seem surprising if you’ve never really sat down and thought about outsourcing in great detail.
Focus
Your business success, in fact in life depends on how well you do the most important things. Outsourcing helps you to do this by allowing you to focus on the most important parts of your business, ones that are critical to your success. For example, outsourcing delivery helps you focus on the product more. If you are in the early days and have little business delivery may prove a distraction. If you are busy managing an adequate delivery fleet is daunting. Instead, you can use both resources and time to do what makes your customers happy.
Lower costs
By focussing your resources where it matters outsourcing allows you to lower costs. We looked at the example of delivery. Consider the investment that is required in a delivery vehicle or fleet. The staffing, insurance, maintenance and repairs all come with owning vehicles. An established delivery partner has made all these investments and more. Also, consider the teething pains of setting up a delivery system and the costs incurred while learning to do it properly. All of this can be saved through outsourcing.
Promote growth
Outsourcing promotes growth by allowing you to focus on what matters. That’s the customer in case you were wondering. You can redirect the money and time into customer acquisition which is where the real action is. Customer acquisition cost is one of those costs that often go ignored but is of the utmost importance. Outsourcing also promotes growth by helping you get to market sooner. The sooner you get to market the sooner you find customers.
Maintain operational control
There are various degrees of outsourcing. Outsourcing doesn’t look the same in every function, business or industry. So while many examples of outsourcing take the form of washing your hands clean of a function and all that comes with it that is not always the case. Internal audit for example is a business function that is often outsourced with the personnel blending in seamlessly with in-house staff. In these arrangements, the outsourced staff perform and behave as in-house staff allowing the business to maintain operational control. Another example of this is security guard services.
Staffing flexibility
This one comes in handy when you consider two scenarios that most businesses go through. When you start a business you don’t know how busy it’s going to be. So investing in capacity is difficult because you don’t know how much you will need. The other scenario is that of fluctuation which almost always happens. Sometimes you will have a reduction in activity and have excess capacity to produce that is now idle. Machines can sit but staff will require payment. If you outsource the service you would only engage the service on demand giving you flexibility.
Continuity and Risk management
Sometimes, things go wrong. Eventually, something will and outsourcing can save you from the full impact of things going wrong. Assuming you have a function in your business that you can no longer provide because of a machine outage or other internal problem that will likely lead to disappointing your customers. If the function were outsourced dealing with such a problem would be up to the provider. In a really bad scenario, you would switch providers as soon as possible. This allows you to carry on with business as usual.
Develop internal staff
This isn’t going to work for every single function in every single business but outsourcing can develop your internal capacity to do things. Whether it’s giving you time to build the financial muscle or teaching you the ropes by working alongside your existing staff and thus giving them exposure with experience. This works with functions such as human resources or bookkeeping. In outsourcing, you don’t give up on handling the function in the house forever but rather as long as you need.
