What is Outsourcing?
Outsourcing is an agreement of work between a company and an outside service provider. More specifically, one company hires the services of another company, consultant, freelance, or agency to work on or manage a task or job. Outsourcing usually involves the transfer of employees or assets from one company to another. An example of outsourcing is a restaurant chain having an entire phone app for its restaurant designed and produced by a tech company abroad.
The Pros of Outsourcing
Many people are interested in outsourcing. It has practically gone viral in the tech world. Many new startups and big firms are going with outsourcing for various reasons. With that said, get to know some of the perks of outsourcing yourself. You can decide if it’s for you or not. Here are some reasons why many are raving about the benefits of outsourcing.
Lower Costs
Not all companies are created equal. On the one hand, a company from silicon valley might have the economic leverage to afford to hire professionals straight from the local market. On the other hand, another company might lack the financial power to hire local professionals, especially in inflated markets. The reality is that, in a free market society, increasing your profit margin versus your costs is the primary goal. Otherwise, companies would not be trying to find innovative ways to increase profits. Now, it’s also true that every company has its reasons for outsourcing. However, it is pretty safe to say that “lower costs” is one crucial reason why companies outsource. Think about it. By outsourcing, you immediately lower your costs related to recruitment, training, hiring, managing, and other privileges such as housing.
You may think that while seeking lower costs, you will sacrifice quality. On the contrary, outsourcing often gives you both high-quality and low prices. And if many are taking advantage of this, why won’t you?
You Get Access to a Larger Pool of Professionals and Skills
When it comes to hiring professionals, especially in IT, you may only have access to a limited talent pool. And if that’s all you got, then you will have to settle with what you find. However, outsourcing automatically gives you access to a worldwide talent pool that will cost you less and bring exceptional skills. For example, if you want access to talented and highly-skilled software developing professionals, outsourcing is the way to go.
No Need to Hire More Employees
In certain countries, usually post-developed countries, hiring employees can be costly. But when you opt for outsourcing, you can hire and pay the people who work for you as a contractor. This process gives you the benefit of not hiring any employees and saving the costs of training and providing benefits.
It Contributes to the Economies of Developing Countries by Providing Jobs
One marvelous thing about outsourcing is that it creates an opportunity for people in less developed countries to make more money than otherwise. Many parts of the world are not as economically wealthy or fortunate as high-tech countries in North American and Europe. So when companies in wealthy countries decide to outsource, they automatically make people better off than they were. Take, for example, an American startup. That startup could outsource for a third of the cost of hiring in the U.S. This economic exchange benefits both parties in the outsourcing agreement. The American startup would save money from paying less. And the person doing the work from abroad would benefit from a higher salary.
