Historians and economists agree that human progress is directly linked to the division of labor. Outsourcing was an inevitable consequence of that. In 1989 the world found out about the existence of outsourcing. It became a viral business strategy in the 1990s.
Outsourcing services are highly demanded in the US, Western Europe, and Japan. In Asia and the countries of the former Soviet Union, they have been developing more slowly.
To run a business, you need to be rational and practical. Lawyers, financiers, managers aim to optimize expenses and reduce the time of product and service creation. Outsourcing is the best way to do it. The full name of the term is outer-source-using, which means attraction of resources from outside. Business owners don’t want to maintain a large staff because they would have to spend resources on taxes, salaries, and office rent. Thankfully, nowadays, you have a choice between increasing the number of employees and expenses or working with an outsourcing company.
TOP 5 main advantages of outsourcing:
- overall cost reduction;
- reduction of personnel costs;
- ability to focus on the main activity;
- access to higher quality services;
- sharing responsibility.
Outsourcing has some differences from other forms of cooperation. The contractor is not involved in the creation of the main product or service. Outsourcing companies perform secondary tasks. These are the main features of outsourcing:
- agreement on the transfer of certain functions;
- the term of the contract must be at least a year (long-term cooperation);
- only secondary functions can be transferred to the outsourcer;
- the possibility to relegate some business processes.
Advertising, office and warehouse cleaning, and website development are the best examples of outsourcing. Most business owners delegate authority to outsourced specialists when it comes to bookkeeping, maintenance, recruitment. This helps enterprises to focus most of their resources on the main activity.
The Most Popular Outsourcing Examples
Outsourcing has become a normal practice in business. Very often, we don’t even see it as a separate category. There are some criteria that help divide outsourcing companies into certain groups. The first one is the specifics of their activity, the next one is the number and specificity of the transferred functions, and the last criterion is geopolitical data, which is clearly visible in IT-outsourcing. Employees can work from different countries all over the world, creating a single product.
Internet technologies have been running our lives for many years. We cannot imagine the work of any business without them. Every company wants to hire a highly qualified IT-specialist, but not every company can pay a good salary. Moreover, not every company needs to have such a specialist in-house because of the limited work scope. IT is a top example of outsourcing. These types of outsourcing companies work in two directions: keeping computer equipment in working order and creating new software. Even large banks and other financial institutions transfer the authority to establish and maintain cybersecurity to outsourcing companies.
Now what about new app development? Many business owners can’t even imagine how much knowledge and experience it takes. IT specialists work with different products, and their specialization depends on many factors. Do you have the ability to tell a qualified IT developer from a less qualified one? Do you know the difference between Backend and Frontend developers, Full-stack and Desktop developers? Thus your best choice is to contact a reliable IT outsourcing company.
2. Labor protection functions
According to legislation of every country, every employee has the right to safe working conditions. At a large company, labor protection functions must be carried out by a suitably qualified specialist.
Business owners or executive directors can create a special department of labor protection, or transfer these functions to a more experienced outsourcer.
Labor protection outsourcing companies provide the following services:
- organization of obtaining permits for high-risk work;
- organization of training for this category of employees;
- the briefing of employees upon hiring;
- filling out the logbooks;
- development and storage of labor protection documentation;
- control over labor protection;
- organization of medical checkups;
- technical inspection of high-risk equipment;
- support in the investigation of accidents in the workplace.
This list of functions provided by labor protection outsourcing companies is not complete. But it clearly shows that this volume of work needs special training and additional resources.
Outsourcing in accounting involves the transferring of an organization’s functions and bookkeeping. Its financial side is the most complicated aspect of business processes. Principles of interaction between the enterprise and outsourcer depend on the volume and nature of the required services. The goal is the ability to manage several business processes at the same time. The leader needs to have knowledge and experience in this sphere.
Small firms need easily and narrowly focused accounting services to transfer these functions to a third-party company. It allows businesses to save on installing and updating accounting software, staff salaries, and taxes.
4. Legal services
If an enterprise doesn’t have a habit of breaking the law, it doesn’t need a permanent lawyer in staff. Most businesses need legal services several times a year. A contract with a law company is a good way to get qualified legal aid. You have to pay only for solving your legal issue.
Law offices provide outsourcing services in different aspects of business legal support. They can help you in labor, corporate, and tax law, as well as provide legal support in court. International law companies can help you with foreign economic activity and exchange regulation.
5. Personnel outsourcing
Do you want to reduce the costs of employee salaries? Then look into personnel outsourcing. Formally, the employees are members of an outsourced team. You have the authority to assign tasks to them. It is used in various projects very often, especially if the hiring company lacks resources and time.
Recruiting companies specialize in the search and selection of personnel. They help an employer to find a highly qualified employee as soon as possible. Such companies research the labor market and follow the latest supply and demand trends for specific jobs. They have a constantly updating database of employees that allows you to form a professional team for your business.
There is a difference between outstaffing and outsourcing. The term “outstaffing” means that you can use another company’s staff for a short period. For example, when you need qualified specialists for a season’s work or a particular project. Outstaffing is suitable if your employees need a sick leave or vacation. In this case, the employee works on the territory of the client’s enterprise. If you have an outsourcing agreement, the work is carried out in whole or in part on the contractor’s side.
6. Outsourcing in production
This type of outsourcing is actively used by huge enterprises that have large production capacities. For instance, all the automotive industry’s global brands successfully transfer various functions to highly specialized firms. Large energy companies, technology, and telecommunication enterprises have good experience of outsourcing. As do the aviation and space industries. Some companies don’t produce anything, but they can have hundreds of partners in different production types. The main aim of such companies is to ensure the sale of products on the market.
Outsourcing in production allows the enterprise to focus most of its resources on creating and improving quality services or products. It is crucial because of new technologies that appear, changes in priorities in the sales market, and conditions of extreme competition. It is a good way to make production more flexible. For instance, small plants and factories have more opportunities to restructure their activity.
Do you know that many famous brands don’t produce their products in countries where they were created? Their plants and factories are placed in countries with cheap labor costs. This way, they reduce the costs, make a competitive product, and increase the income.
7. Logistics outsourcing
Many years ago, enterprises had to invest a lot of money into preparing and maintaining large staff responsible for coordinating transport and warehouse processes. Nowadays, you don’t need to maintain a special transport department. The only thing you need to do is to contact a logistics company.
These companies have the opportunity to deliver your goods anywhere in the world. You can use the services of railway, car, ship, and air logistics. This type of outsourcing delegates most transport operations to other companies. It significantly reduces the costs and simplifies the business process management.
Logistic companies can provide not only transportation services but stock storage too. You don’t have to search and rent warehouses and worry about the safety of your products.
Choosing the best logistics operator requires paying attention to their reviews, service prices, and execution rate. The efficiency of interaction between customers and logistics companies depends on many factors. You have to consider product features, the amount of freight traffic, and delivery frequency.
What is the best example of outsourcing? We believe it is advertising. Everybody knows that advertising is the engine of the trade. But many business owners are not ready to spend a massive part of their budget on advertising. Outsourcing in this sphere has many benefits:
- you don’t have to hire and teach in-house specialists;
- you can reduce the salary fund;
- you can legally minimize taxation;
- you can employ an advertising company from time to time for a particular product.
Nowadays, outsourcing in advertising is not a fad but something vital to any modern business: from small internet shops to energy giants. You can use the services of the most professional and highly recommended advertising agency even if your business is across the world from them.
9. Cleaning outsourcing
Have you ever heard the saying that a clean and orderly office is the face of a company? Have you ever faced problems with finding qualified and responsible cleaning staff? A professional cleaning company could take care of your problems. They have a wide range of services that can satisfy the most demanding consumer.
Owners of small shops, supermarkets, huge business centers, beauty salons, and pharmacies are clients of cleaning companies since they are fast, convenient, and professional. Cleaning firms perform many functions: from searching and training personnel to organizing and controlling the work process.
Have you ever seen business centers located in skyscrapers? Then you have probably seen window washers hanging in the air and cleaning hundreds of windows. That is one of the best examples of cleaning service outsourcing.
10. Knowledge process outsourcing
Nowadays, the amount of information on just about any issue emerging from various sources is overwhelming. Most of us don’t know how to use it. Knowledge process outsourcing is a new direction that has started developing in the United States. Many countries don’t have any experience in this field yet. Knowledge process outsourcing (KPO) manages enterprises’ processes that require comprehensive study and in-depth analysis. In this case, outsourcing companies form a knowledge database and are responsible for its management.
Knowledge and information work is carried out by employees of various companies or divisions of a large enterprise. The outsourcer could be in the same country or even several different countries. But everybody works for the same result and can use the received information in the decision-making process in the future.
Knowledge outsourcing is often perceived as special training for companies’ staff. But this is not true. The purpose of personnel training is to improve employees’ qualifications and work efficiency, establish interaction within the team, and increase profits.
We hope that you got sufficiently complete and reliable information about the best examples of outsourcing. It is important to know how to make your business processes easier and channel all your energy into activities you enjoy. Every business should keep a balance between the resources spent and the profit received.