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7 Compelling Reasons Why Companies Choose To Outsource Work

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Whether you operate a large, medium, or small business, your employees are the lifeblood coursing through the halls. This internal team represents the largest cost center for your business. According to the U.S. Bureau of Labor Statistics, labor costs can account for as much as 70% of your total business costs, which may hamstring or cripple the growth of startups and small businesses. 

Fortunately, many large Fortune 500 firms have a well-kept secret they use to manage staffing costs — they outsource work through an outsourcing company. 66% of companies in the United States with 50 or more employees outsource work, while 29% of employers with fewer than 50 employees choose to outsource. And what do they get in return? Companies that do outsource work enjoy efficiency gains, greater productivity, improved innovation, and cost savings. It has become so prevalent that 68% of large U.S. consumer products outsource some part of their workforce. Let’s explore the seven reasons your business should consider moving from in-house to outsourced work.

What is Outsourcing?

Outsourcing is hiring another company, individual, or freelancer to perform tasks, services, or functions typically carried out by part-time or full-time employees. Whether it's done locally or internationally, outsourcing can help you create a competitive advantage by accessing the right talent at the right time for less. There are two main categories of outsourcing: 

  1. Business process outsourcing (BPO) is when you contract with a service provider to handle specific operations or business processes. BPO involves outsourcing different back-office functions and easily replicated processes.
  2. Information technology outsourcing (ITO) involves contracting a third party to handle some or all of your IT functions, such as data center management, software development, help desk support, and cybersecurity.

There are no limits to the types of outsourcing roles. Some of the most common include: 

Location-Based Outsourcing Options

In addition to BPO and ITO, outsourcing can be based on location. Three main types of location-based outsourcing solutions are onshore, offshore, and nearshore outsourcing.

Onshore Outsourcing

Onshore outsourcing refers to outsourcing services to a company, freelancer, or service provider within the same country. An example of onshore outsourcing would be a U.S. company outsourcing accounting services to another U.S. company. Onshore outsourcing is the go-to solution when a company wants to maintain a high level of control and communication with its outsourced partners.

Offshore Outsourcing

Offshore outsourcing refers to sending business processes to a company or service provider in a different country, often with lower labor costs. An example of offshore outsourcing would be a U.S. company outsourcing software development to partners in the Philippines, Malaysia, or India. Offshore outsourcing is often chosen for its cost-saving benefits, as labor costs in some countries can be dramatically lower than in others.

Nearshore Outsourcing

Nearshore outsourcing refers to outsourcing services to a company or service provider in a neighboring country, often with similar time zones and cultural similarities. Examples of nearshore outsourcing for U.S. companies can include:

Nearshore outsourcing offers similar cost-saving benefits as offshore outsourcing. Because of the proximity between the parent company and its outsourcing partner, nearshore outsourcing often reduces language and culture barriers to a minimum.

Outsource Work for Full-Time, Part-Time, and Seasonal Roles

When it comes to outsourcing, there are no one-size-fits-all solutions. Just as you have part-time, seasonal, and full-time employees, you can outsource roles for full-time, part-time, and seasonal work. Outsourcing is a versatile staffing solution that can flex and bend to meet your organization’s needs today and tomorrow. 

Full-time outsourcing can provide the long-term stability and reliability of hiring full-time employees. Part-time and seasonal outsourcing may offer greater flexibility and allow enhanced scalability based on demand. For example, you may need more sales reps during the peak selling season. Once it ends, the need for as large of a sales team will dwindle, which makes outsourcing sales and other roles an attractive option.

Why Do Companies Choose to Outsource Work?

Companies of all sizes choose to outsource work to save time, save money, and drive more efficient business growth. Here’s how outsourcing creates a direct path to these strategic initiatives.

To Reduce Repetitive, Time-Consuming Tasks

As an employer or business owner, your employees are only available to you for a limited number of hours. During these hours, you should maximize their time with activities and functions distinct to their role and capabilities. For example, a VP of sales, Sheila, is mired down by customer requests and account inquiries. It leaves her little to no time for prospecting and building relationships. Sheila regularly works on weekends and nights to stay afloat, which causes her stress.

Unfortunately, employee stress is a huge problem, costing U.S. businesses over $300 billion a year from

  • Accidents
  • Employee turnover
  • Low productivity
  • Absenteeism
  • Medical and insurance costs

The added stress doesn't just impact Sheila — it spills over to everyone on her team. The best solution is to keep your employees happy by eliminating time-consuming manual tasks with BPO. In the process, your employees can focus on the most important tasks and help steer the organization toward its goals. 

To Boost Cost Savings & Increase Profitability

The top benefit of outsourcing centers around the exceptional cost savings generated. Outsourcing to a country like the Philippines can lead to up to 90% lower cost of labor. In addition to the direct savings on operational costs, outsourcing can help:

  1. Drive infrastructure cost savings on line items, like office space, equipment, and utilities.
  2. Reduce overhead costs associated with maintaining an in-house team, like workplace benefits and taxes.
  3. Allow companies to access specialized skills and expertise that may not be available in-house. This can result in higher-quality work and increased efficiency.

Once you've reduced your labor costs, you can redirect the savings into other areas of your core business to drive profitability.

To Try New Initiatives With Reduced Risk

Far too often, the best and most profitable ideas never come to fruition due to limited resources. Whether you dedicate full-time employees to focus on core competencies or shift these responsibilities to your business process outsourcing contractors, outsourcing can help you explore new opportunities. 

Best of all, your organization can explore these opportunities without committing to the long-term investment of hiring a full-time employee. To further reduce the risk associated with the new initiative, your outsourcing provider can connect you with human resources that have experience with similar projects. All of these benefits of outsourcing combine to pave the road toward faster time to market and success. 

To Access a Huge, High-Quality Talent Pool

We get it — recruiting, hiring, and training are a drain on your human resources department. Benchmarketing data from the Society for Human Resource Management (SHRM) suggests the average cost of hiring a new full-time employee was $4,700. However, many employers estimate the total cost can be three to four times the employee's salary. No matter the cost, you need access to specific talent to help grow your business and achieve your organizational goals. Instead of spending this astronomical figure per employee hire, working with an outsourcing partner can ensure you have access to the talent pool you need in a cost-effective way.

To Allow for Faster Growth & Secure Scalability

No matter your business model or business operations, your growth hinges on your ability to efficiently innovate. Outsourcing, at its core, is engineered to help you drive faster growth in a scalable way. And by partnering with an outsourcing provider that meets your specific needs, finding specialized talent for a project is nothing more than a phone call away.

For example, if you’re launching a new website, you can quickly access a team of web developers for the site design and development portion of the project. Once the site goes live, you can reduce that team size and bring in an outsourced content team to help populate your site with high-value information. Then, transition outsourced work to a marketing team that can create and manage a series of campaigns to promote your website and drive growth and revenue.

All of this work can be done with a tiny in-house team and a large outsourcing team that scales to meet the workload demand that you have to offer. Outsourcing creates business elasticity, allowing you to stretch, flex, and meet business needs while generating cost savings.

To Focus on Core Business Processes

As the CEO, manager, or business owner, you know your core business, which probably doesn't include complex administrative functions. Outsourcing tasks like payroll, accounting, and IT support can free up resources to enhance your core business operations and improve overall efficiency.

Outsourcing allows you to access the specialized expertise you need that may not be available in-house. Because you can delegate specific tasks, outsourcing can help:

  1. Reduce in-house employee workload
  2. Generate cost savings
  3. Increase business efficiency
  4. Improve the quality of your products/solutions

To Access Round-The-Clock Coverage

Today's customers and clients expect you to be available whenever and however they need you.

Fortunately, the global human resource supply chain can alleviate all these concerns. By leveraging time zone differences and utilizing a global workforce, outsourcing can easily ensure your operations continue around the clock.

For example, a company based in the United States can outsource its customer service operations to a provider in India or the Philippines, where the time zone is 12 hours ahead. This means that while your in-house staff is home asleep, the outsourced team in India or the Philippines can handle customer inquiries and support requests. 

Challenges of Outsourcing ... And How to Work Around Them

Even the best and most dynamic solutions have considerations. And the cons of outsourcing are just that — considerations.

Your Customers May Feel Processes Change  

If your outsourcing provider fails to provide adequate onboarding and training, your customers may notice a drop in customer service. You can reduce the likelihood of this by ensuring a comprehensive onboarding and training program is a cornerstone of your outsourcing strategy. Make sure you work closely with your outsourcing provider to check this box.

Poor Communication Due to Language Barriers

While outsourcing can save money, poorly selected outsourced workers can create a language barrier problem for your customers, especially when outsourcing offshore. To avoid this problem, choose an outsourcing partner that fluently speaks your customers’ native language. Misunderstood phrases and thick accents can lead to frustration and breed miscommunication for customers looking for assistance. You can also ensure outsourced contact center agents meet your language requirements with Language Skills Assessment Tests.

Lack of Industry Expertise 

It’s imperative to outsource roles to employees who understand your industry. You can check this box by partnering with outsourcing companies familiar with your industry. More so, make sure the company offers a robust training program for newly hired agents and employees who may not be familiar with the industry. 

Quality Control Standards Out of Alignment

One of the seldom-discussed cons of outsourcing is the process of handing over the work. When tasks are performed in-house, it's typically done a certain way by an in-house person or team. It’s imperative to communicate these quality control standards to ensure the work continues to be completed in a sufficient and productive manner. 

Finding Trusted Outsourcing Providers

The success of your outsourcing initiative hinges on your ability to partner with the right outsourcing company. Simply put, not all outsourcing partners are created equally. Considering the importance of the work, it’s imperative to choose a partner with longevity and proven results, and TDS Global Solutions can help you do that. 

At TDS Global Solutions, we assist our clients in the planning, management, and accomplishment of their worldwide business expansion goals. Thanks to our focus on driving strategic growth and improving our client’s bottom line, we are recognized as one of America’s Fastest-Growing Private companies. And our results speak for themselves:

  • We have served over 750 companies of all sizes.
  • We have tested over 15M Contact Center Agents.
  • We have more than 1,000 Executive Placements.
  • Our reach expands to more than 30 countries.

We take a tailored approach to uncovering your needs and customizing the perfect solution based on your industry, task requirements, time zone requirements, language requirements, and more. We offer more than 30 years of experience and have developed an exclusive list of outsourcing partners that can meet any combination of needs and goals.

If you’re looking to unlock the benefits of outsourcing, it starts with working with TDSGS Global Solutions to find your ideal outsourcing partner.

Complete our online contact form or schedule a call with one of our experts today for a free, non-committal needs analysis.

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