The Top 5 Reasons Why Companies Outsource

Posted on July 6, 2012

Different companies outsource for a variety of reasons, based on the nature of their business or their type of industry. But mainly global companies outsource to cut down on cost, get access to specialized skills and share business risks. Here are five of the most common reasons why companies outsource:
1. Outsourcing can help you reduce costs

Low labor costs are the primary reason why companies choose to outsource. For example, outsourcing to India can give you access to services of international quality at a low cost, as the cost of living is much lower in India. Outsourcing can also help you save on overhead cost, as you will not have to invest on expensive infrastructure, technology or software.

2. Outsourcing can help you focus on your business

With non-core functions robbing time, money and effort, most companies are unable to concentrate on the core competencies, resulting in poor business growth. Outsourcing a part of your work can give you the flexibility to focus on the core aspects of your business. Since outsourcing increases the work flow, you can finish your projects faster.

3. Outsourcing can give you access to world class capabilities

Outsourcing can give you access to specialized skills that cannot be found locally. For example, you require a skilled mobile application developer at a low cost, but are unable to find one. Outsourcing can help you gain access to such skills.

4. Outsourcing can help in risk management

By outsourcing, your company does not have to undertake all the business risks alone. The outsourcing of your non-core or even your core business functions to an external service provider helps in risk sharing. Outsourcing is a good risk management strategy that you can apply for your company.

5. Outsourcing can compensate for insufficient internal resources

If you are short on resources, it is best to outsource, as you can save yourself the trouble of hiring, training and retaining new resources. You also will not have to pay for any additional cost, such as office space or software. Unlike internal staff, an offshore service provider can provide you with 24/7 services for 365 days a year, without vacations. So the next time you think about hiring new resources, consider if the work can first be outsourced.

What is the main reason why your company wants to outsource? Is it cost, risk sharing or insufficient resources? Share your views with us.

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