The Benefits of Outsourcing In Small Businesses

Before we can begin discussing the benefits of outsourcing
especially in small businesses we must fully understand what outsourcing is and
what outsourcing is not (as many people often confuse it with off-shoring, a
similar but different thing).

 

So what is outsourcing? A fairly recent addition to business
terminology, outsourcing in a business is the delegation of certain non-core
operations to other separate entities that specialize in those operations. Put
very simply, outsourcing means giving away certain tasks which though imperative
to the actual business, can be better managed by another industry which
specializes in that task.

 

Outsourcing entails transferring management control and
decision making power to the other industry as well. This means that there is a
lot more interaction, and information exchange, coordination and trust between
the outsourcer and its client, making it different from the established
buyer-seller relationship.

 

Now that we have established what outsourcing is, let’s
focus on what it is not. Outsourcing is commonly confused to off shoring, which
is the relocation of an entire or part of a functional unit of the business to
another nation, whether it remain in that business’s control or not.
Outsourcing is usually limited domestically. In many cases, such as
telemarketing, the company wishes to employ the service of overseas call
centers. Thus when outsourcing crosses national borders it is called offshore
outsourcing.

 

So why should companies outsource? There are plenty of
benefits of outsourcing, especially for small businesses. The main reason for
outsourcing is the cut in costs, as they don't have to provide benefits to
their workers, and have fewer overhead expenses to worry about. Many businesses
prefer offshore outsourcing, as it allows them to utilize the low labor costs
of countries such as India
and China. Not
only that, the relatively high exchange rates in these countries makes offshore
outsourcing more advantageous. In India,
the dollar exchange rate is 45 rupees per every American dollar. Thus the
average American worker who would take (for e.g) $5 per hour can be replaced by
an Indian worker employed at $2/hour.

 

Outsourcing also allows smaller businesses to focus on core
competencies, and relieve themselves of the peripheral ones. Thus they can
concentrate on providing better quality products and service. Even if the
quality does not improve, the cut in cost allows for greater productivity. This
increases the overall economy in total. Not just that, the business can produce
good quality products without having to employ a large amount of people. Thus
lowering their overall labor charges and employee benefit.

 

The best facet of outsourcing though is the ability to
employ professionals to get the work done. In areas such as advertising and
telemarketing, it is usually more cost effective, and productive to hand over
the task to a separate company and pay them accordingly. Thus instead of
handling their own affairs in a substandard manner, they can employ
professionals to carry out the process efficiently and effectively. And once
the outsourcing company is assured that its client is managing perfectly, it
can focus on creating better products and services.

 

For small businesses, outsourcing allows them to work with
the minimum of labor and equipment expenditure. For example, a small firm
outside city limits can outsource its transport, thus making it unnecessary for
it to acquire buses, cutting the cost of fuel and saving its resources. Another
prime example is telemarketing and advertising. Many companies prefer to
outsource this facet of marketing to professional call centers and advertising
agencies, thus eliminating the need to form an entire unit devoted to this
task. Not only that, but because the outsourcing client has a fully established
infrastructure devoted especially to the service provided, there is no
necessity for a small business to invest in developing its own internal
infrastructure to accommodate that service.

 

In small businesses there’s only a limited access to
resources and ideas. Outsourcing allows the business to garner new ideas and
innovations. It could also result possible cash influx due to the transfer of
assets to the new provider

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