Why Do Companies Outsource? Choosing the right company to work with is the most important decision

Outsourcing agent working on a laptop
Jul 15
Read 4 Min

As a business owner, you’ve surely heard of outsourcing as an increasingly applicable method of doing business. But did you know that it started in the seventies and that it became and remained hot since the late eighties? There are many reasons for companies to choose this way of doing business, and we’ll give our thoughts on what the good and bad sides to it are.

What Is Outsourcing?

It’s a type of business practice when one company hires another to perform services that are normally done internally. Outsourcing became very popular and important over time since it’s evolving rapidly. A high level of outsourcing growth was recorded since the 1990s until today. It’s all about saving money and time – that’s why so many companies found it as a way to stay on the market and to thrive while cutting costs.

What Are the Pros and Cons of Outsourcing?

Just like any business strategy, outsourcing has its pros and cons. We’ll list them out to give you a picture of what it really means for a business, as well as team culture.

The Benefits of Outsourcing

The first and most important reason why outsourcing works so well is that it saves a lot of money. A business owner that decides to outsource their business to another company will cut the costs on the salaries, equipment, and technology;
While doing all of that, the quality of service won’t fail. Companies that offer outsourcing services usually have professionals as employees, with a high level of English proficiency, but with lower labor costs;
If you choose a good company to work with, product development won’t fail either, even with saving on production costs;
Your company is going to save time as well since the outside company is fully focused on finishing the tasks you delegated;
Once you hire another company to do a certain part of the work, your team will have more time to dedicate themselves to the tasks and strategies that are important to you;
You won’t need to lose time and resources on interviewing, training and hiring new people for the positions that need to be filled out. We all know that hiring an expert costs a lot, so choosing to outsource will save you money on that field as well;
Many services can be outsourced – you can have top customer service, excellent sales representatives, outstanding tech support, management, and programmers, just to name a few;
Outsourcing companies can relieve you of stress while doing nerve-wracking things that the team in your firm doesn’t like doing or doesn’t have the expertise for. You can choose which part of your business you want to outsource, and when you do, you can have talented professionals doing the work for you;
Many countries that offer outsourcing services don’t have a problem with time zones and working the night shifts;
Outsourcing also strengthens the economy. A business owner must come to the company that he chooses to do the work for him, which leads to strengthening international ties.

There Are Some Bad Sides, Too

When a business owner decides to hire an outsourcing company, it will definitely impact the team and company culture, sometimes negatively. This is why it’s common practice to outsource low to mid level positions while keeping the management and executives close to home.
Because of the distance between the main and the outsourcing company, and because communication mainly happens online, there might be problems with you losing control over the remote employees;
If you don’t choose a good company, the quality of your product may fail because of the lack of transparency.

This Is Considered a Debatable Topic

Many people have different opinions and experiences when it comes to outsourcing. The main problem would be that a CEO chose a bad company to work with, which led to bad results, missed deadlines, or worse.
What Should Small Companies Do?

Small companies are the anchor of the U.S. economy. In the U.S. every privately owned corporation is considered a “small business” by the U.S. Small Business Administration if it makes $35.5 million in sales and has 1,500 employees, depending on the industry. Outside the U.S. firms with less than $7 million in sales and fewer than five hundred employees are widely considered small businesses, outside the government. For them, outsourcing is gambling. They often do it because they have no other choice. It may be risky, but there are also advantages:

They can have better control of the capital costs since they will avoid large expenditures, especially at the beginning of the firm;
They can start new projects faster because there will be no hiring of new people and training them;
It will allow them to have a better focus on their core business.

Small firms usually choose to outsource payroll, bookkeeping and content marketing. What About the Big Enterprises?

Every firm that has more than $7 million in sales annually is considered a large business, again, depending on the industry. Since they have a big turnover of money, many employees, and possibly branches in other states or countries, the risk for them is minimal. They can afford to do everything in their own company, but can also decide to delegate some services to other companies and cut their costs.

What Countries Excel in Outsourcing?

In these two decades that outsourcing took a big place in the world’s economy, some countries around the globe made themselves experts at doing this. Some of them are also U.S. favorites like India, China, and the Philippines. In 2017, India held around 65% of all outsourced IT jobs. Another country that is a great option for outsourcing because of English proficiency, western mindset and the quality-to-price ratio is Serbia. Many talented and educated people are available for work and have no problem with U.S. Time Zones because the difference is six to nine hours. Serbia is well-known for its programmers and IT professionals.

Conclusion

As you can see, there are many advantages and benefits to outsourcing, no matter how big or small your firm is, but there are also some downsides. It all comes down to saving money and time when you hire a reputable and trustworthy firm. Finding a good company to work with is no quantum physics – we live in a world of technology and all kinds of data is available. If you think you found a candidate to give you assistance to stay on the market and to improve the quality of your work, then you’ve probably just found a cost-effective solution to beat the competition and excel in the industry you’re in.