In our article “Preparing for Outsourcing: How to Build Your Base Case for a Cost/Benefit Analysis“, we showed you how to create a base case cost scenario that could be used to support a decision to outsource. In the article, we cited that most P&L decision makers in the U.S. (approximately 72%) already outsourced one or more business processes to external service providers because of the numerous advantages related to outsourcing.
While outsourcing initiatives do provide organizations with a multitude of benefits, outsourcing isn’t for everyone. Every company operates differently. In order to determine a strategy that is right for your company, you need to weigh the advantages against the costs, risks, etc.
Consider each of the following strategic advantages and see why your company would consider outsourcing.
Cost Reduction
Cost reduction is one of the most common reasons companies cite for outsourcing services. Providers are able to leverage labor markets in lower cost locations to perform the same services for less. When the same function is performed for less, you presumably lower your cost. However, while cost reduction is typically a major driver, it is seldom the only reason for outsourcing.
Improved Service
- Outside Expertise – Service providers perform the same services on multiple projects with multiple companies, developing a high degree of familiarity and expertise.
- Advanced Technology – A service provider’s economy of scale enables them to continually invest in technology that supports their core business and allows clients to remain current in terms of technology and innovation without incurring the high training and capital expenses typically involved.
- Global Reach & Support - By outsourcing to vendors in different parts of the world, companies can expand their reach globally. Having a global reach enables you to provide services and support in more locations.
- Around the Clock Service– By outsourcing overseas companies can take advantage of “follow-the-sun” principles in order to provide services around the clock. When workers in one location are coming to the end of their workday, workers in another location around the world are just starting theirs. Remaining workloads can be transitioned from location to location in order to operate continuously.
Increased Service Offerings
Due to their size and economy of scale, suppliers can typically spread infrastructure costs across many customers, making it more feasible for them to invest in technologies and capabilities that allow your company to offer additional services.
Operational Flexibility
Outsourcing converts fixed costs into variable costs, releasing capital for investment in your core business. Often times, service providers can leverage resources across multiple projects to be able to handle the periodic fluctuations that are inherent in every business, without resorting to overstaffing or the inefficiency and poor quality associated with temporary labor.
Free Consultation
If you have questions about creating your company’s base case of costs or about outsourcing in general, DATAMARK outsourcing specialists are available for a free initial consultation.
Trained specialists can quickly provide answers to your outsourcing questions and can help ensure that you have all the information required to make an informed outsourcing decision.
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