Outsourcing is defined as the contracting out of any task, operation, job or process that was originally performed by employees within your company to a third party. These functions can be performed on-site or off-site. Hiring a temporary employee while your secretary is on maternity leave is not outsourcing.
There are many reasons to choose to outsource a particular function of a business, here’s a few of the reasons:
A particularly strong reason to outsource involves a shortage of a resources. This can be available employees that possess knowledge in a certain area (e.g. engineers or business analysts), and an available labour force that possesses a necessary level of expertise within a budget.
Realignment with Core Business
Some peripheral operations are outsourced frequently. This gives the managers the ability to concentrate on the core business issues instead of devoting resources to areas that may be necessary but are not related to the business’ core competencies. An example is a hospital that outsources its security operations to an outside company that actually specialises in security.
The prices of labour and/or materials keep increasing and competition keeps forcing prices lower. If there is an outsourcing solution that can save your company money, and generally this is the case, these areas should be investigated.
Seasonal or cyclical demands that come and go put varying demands on the resources of the company i.e. End of Financial Year when an accountant is flooded with tax returns or if your business was attending an Expo and stretching personnel resources. An outsourcing contract could provide the flexibility needed to stabilize these varying demands.
Reduced Overhead Costs
Some functions require a large outlay of money just to get started. This expenditure could be avoided by contracting with a third party. For example, outsourcing a call center rather than undertaking a costly expansion to the telephone system and office space in order to meet increasing customer service demands. And another bonus is that the third party will pay their own taxes, their own holiday pay etc. and you don’t need to buy extra equipment or rent desk space to accommodate them.
Some Common Outsourced Tasks:
Although many areas and functions are outsourced, here are some of the frequently outsourced areas:
- Information Technology Function
- Network and Telecommunication (call centres)
- Human Resources
- Insurance Administration and processing
- Accounting and bookkeeping
- Marketing and social media
Many businesses use outsourcing every day, but they do not consider it outsourcing. Today’s popular media has given the term “outsourcing” the connotation of jobs being shipped overseas to low wage markets (a.k.a. offshoring) but it doesn’t have to be the case since there are many highly skilled businesses that offer such services within Australia, that understand Australian business, speak clear English and work in Australian time. That’s got to be a benefit for all involved.
For any business, it can be very hard to establish a clear set of objectives along with maintaining multiple departments. When it comes to small organizations, things can be even harder. The requirements, duties and responsibilities of managing a number of departments can consume employees and higher management, which will result in reduced focus on the primary goal.