Benefits of outsourcing.


14th March, 2021

Benefits of outsourcing: Why companies outsource (10 key benefits)

Love it or hate it, outsourcing work to a third party presents obvious benefits for businesses.

Business owners often think they can do it all, especially founders of small businesses, but this standpoint can limit a company’s growth potential.

For those that recognise that there are only so many hours in a day, outsourcing can be viewed as a go-to strategy for businesses today.

What is outsourcing?

Outsourcing is hiring outside the business, usually on a limited or temporary basis, for skills that will benefit the business.

According to, the progress of technology has given businesses a monumental edge when it comes to remote workers. This has increased the offshore outsourcing industry astronomically in nearly every category.

Deloitte Global Outsourcing Survey 2020 revealed that the following were reasons for outsourcing:

  • 70 percent said it was about managing costs
  • 40 percent said it enabled flexibility in their business
  • 20 percent said it helped to improve speed to market
  • around 15 percent said it gave them access to tools and processes
  • around 15 percent said outsourcing helped them with agility

Further studies disclose that for every four jobs forfeited another automaton management position is created. This means that outsourcing higher level positions is increasing.

Adding to the trend are innovative software alternatives that provide helpful time-tracking features. Time-tracking helps businesses take a hands-on approach even when miles away.

10 benefits of outsourcing

1. It helps businesses manage costs

Instead of paying a fixed monthly wage to a full-time worker, outsourcing offers a business the benefit of spending only where and when needed, thereby leveraging more control over business assets. The added revenue stockpile can be directed towards marketing or investing in supplementary services.

Research has also shown outsourcing is particularly cost effective for small business owners as they are relieved of the need to pay operating costs associated with worker’s compensation schemes, health insurance, payroll taxes, and office space (although you’ll want to ensure you’re complying with the letter of the law for your region).

2. It delivers a competitive edge

This advantage applies particularly to small business owners.

With the help of remote working techniques, in-house and outsourced roles can be brought together though they may be scattered across different cities, states, or countries. When managed well, this allows a small organisation the same level of access to talent as a much larger one.

3. It frees up capacity for other projects

Another upside of outsourcing is the opportunity for businesses to innovate and kick-off projects more frequently.

This is mainly derived from the on-the-spot expertise outsourced help provides. For example, a company can manage time better by outsourcing right away as opposed to employing, hiring, and instructing a new, full-time employee.

READ: What I’ve learnt from outsourcing payroll

4. Third-party providers are often highly motivated

If a worker lacks the expertise required for a specific job, a company can outsource the task with an added bonus by default.

A contracted worker will often be more enthusiastic and motivated to do a superb job with the hopes of getting commissioned for future assignments.

5. It enables businesses focus on their core competencies

Another great benefit to outsourcing is a better ability to focus on your core competencies.

Core competence concentrates on targeted skills that make a company unique in itself. It’s that “something” that makes it stand out from its competitors.

READ: Why you should stick to your strengths in business

Investopedia defines core competence as:

“The resources and/or strategic advantages of a business, including the combination of pooled knowledge and technical capacities, that allow it to be competitive in the marketplace. They are what the company does best and consist of the combined activities, operations, and resources that distinguish the company from competitors.”

6. It helps businesses to manage transformational change

In response to unexpected market changes, such as regulatory intervention or the emergence of a disruptive competitor, a business may decide to undergo transformational change.

Transformational changes often radically reshape business strategy, processes and organisational culture. While the business is transitioning, outsourcing specialist skills to effect and manage the change would be more cost- and outcome-effective than hiring those skills on a permanent basis.

7. It gives small businesses a step up

Rarely do small businesses carry the clout of larger companies.

Outsourcing gives small businesses a step up by leveling the playing field due to access to highly-skilled labour and expertise that bigger companies favour.

8. It helps businesses uplift service capability

In most businesses, the focus is on increasing sales and productivity. While your sales are increasing, so are the number of customers.

As the number and type of customers increases, your ability to provide support to all of them may become compromised. Outsourcing service support means that you can be very specific when engaging a vendor about the type of support your customers need, and can then access specialised staff to provide service.

9. It improves speed to market

Businesses often operate in a competitive environment in which speed to market is critical. Purchasing new or specialised equipment and training new staff is always possible, but it takes time. Often the cost of acquiring new skills and equipment will defeat the pursuit of speed.

Outsourcing can provide an effective solution in these circumstances.

10. It mitigates business risk

Outsourcing projects, campaigns or processes to experts in their field, you’ll access the expert ability to foresee complexity and mitigate risk.

5 risks of outsourcing

While there are many benefits of outsourcing, handing over direct control of a business function or process to an outfit outside the business involves an element of risk.

Some of those risks may be:

1. Service delivery

if there hasn’t been adequate handover instructions, or if the outsourcing party isn’t up to the task, service standards may may fall behind time or below expectation

2. Confidentiality

Every business holds commercially sensitive information; depending on the type and number of outsourced workers, confidentiality may become compromised

3. Lack of flexibility

If circumstances in either the business or the outsourcing party change, the conditions of the contract might preclude flexibility

4. Management changes

Management changes, or business closure, at the outsourcing company could lead to business risk

5. Security and privacy

In the age of data protection, outsourcing the use of customer data could put the privacy of others at risk

When’s the best time to outsource?

The perfect time to outsource varies with each company.

A business may maintain a limited staff and only require outside assistance for specific tasks. Another company may have adequate staff but require help when taking on additional projects.

When day-to-day operations of a business becomes overwhelming, outsourcing is the ideal solution.

Outsourcing services

Finances are an unavoidable sticking point when it comes to managing outsourcing in a business. Hiring the services of a competent financial adviser is the best way to allocate finances when outsourcing.

In addition to accounting and financial advice, commonly outsourced services include:

  • call centre support staff
  • marketing
  • HR and talent procurement
  • legal
  • executive assistants
  • IT professionals
  • administrative tasks
  • logistics and transport.

This allows businesses to focus on other important areas like development and customer service.

When business owners can invest more time and energy in growth opportunities, instead of stressing about tasks better suited to others, then outsourcing has achieved its goal.