Outsourcing has increased by 16% over the last 5 years according to research published by the London School of Economics. That’s a tectonic shift in the way businesses operate, and it’s also something that’s widely expected to increase further into the future. Global barriers to trade are diminishing, and the more competitive countries already dominate in this industry. In this article the benefits of business outsourcing are explored, giving readers the opportunity to better understand the factors that are powering this phenomenal growth.
Focus On Core Competencies
A business that sells investment consulting services didn’t get into business because they were good at marketing, because they were good at sales, or because they knew how to write software. They got into business because they felt they had a compelling opportunity to offer investors. That’s why the business might choose to outsource marketing to an agency, outsource sales, and call on a software development firm to set up their systems. This allows them to focus on what they are best at, and allow experts to handle the other functions of their business.
Although larger companies will usually employ in-house experts too, some functions of a business have been outsourced for decades. Media buying is very rarely done in-house, and when it comes to legal and accounting services the same applies.
While these functions are still strong for the outsourcing industry, many new markets have developed strongly over the last decade. These include software development, call handling, engineering and carriage.
When you employ one delivery driver, you can only sell so much in a given week. When sales are slow, the driver’s wages still need to be paid. However, when you work with an outsourcing industry you can use resources on tap. When you are able to buy services, rather than employing staff, you can flip fixed cost-centres to variable cost-centres. This makes your business better positioned to scale.
When you employ people you have to worry about being able to generate enough sales to pay their wages. You also have to worry about national insurance, tax and other legal headaches that you don’t have to be concerned about when you’re paying a company. Furthermore, for companies in the UK, you will be able to get VAT back on the money you spend on business services.
When you outsource you can use a company based anywhere in the world. That’s why the business process outsourcing industry is so huge in Asia. The economy there is still developing and therefore wages are much cheaper and the workforce so much more flexible. For many business functions, like software development, call handling, and marketing, there are few reasons why this would have to be done in the UK. That’s why companies will often choose to pay an overseas outsourcing business to handle these functions. Because there is more demand for these types of services in Asia, it also means that Asia often has a more skilled and varied workforce in these areas.
By Alexas_Fotos from Pixabay