Why large companies outsource certain tasks

What is outsourcing?

In simple, business terms, outsourcing is the contracting of processes or services to a specialized third party, often an offshore or overseas company or relocating a business function entirely. Increasingly popular among larger companies, this system is a great way for them to save on overhead expenditure, improve business focus, build customer relationships and increase profits.

It is essential for companies to ensure they build links with suitable clients, so communication and the right management strategy are vital. Business relationships are built on an understanding of common goals and prospects and must be monitored closely.

Screen Shot 2013-09-19 at 11.28.48 PM

What types of outsourcing are available?

There are four main types of outsourcing that are frequently used by large companies; professional, manufacturing, process-specific and operational. They cover services such as customer support, accounting, web design, IT and web support, data entry, research and development, manufacturing and production line, legal services, couriering, cleaning, engineering (including soft and hardware), business management and creative assistance. Each is designed to offer a hassle-free solution to larger companies, helping them to reduce costs and improve the services they offer.

Umbrella companies, such as Crystal Umbrella, are a particularly popular choice for businesses when it comes to outsourcing, as they act as an intermediary between the firm and its contractors. This ensures that all transactions and services are legal and fully compliant with current regulations, as well as being fair to both contractors and businesses. Umbrella companies can also assist with payroll, tax preparation and general administration, ensuring that businesses and their contractors fully understand each other’s needs to form and develop a prosperous working relationship.

Umbrella companies are able to provide contractual certainty for businesses, liaising between contractors, freelancers and the outsourcing company to fulfill all the obligations of the partnership.

 

The benefits of outsourcing

By outsourcing tasks that are traditionally undertaken by internal staff, companies gain access to a whole host of benefits, least of all the financial gains. The savings to be made from lower international labor rates are just one of the motivations for outsourcing services, avoiding the costs associated with labor-union contracts, as well as high government-mandated taxes and regulatory costs.

Outsourcing certain services reduces energy costs and overhead expenditure, such as capital equipment costs, which in turn increases internal savings. Companies are therefore better able to control and focus their cash and resources towards their core business and services, making them much more efficient, whilst also increasing short-run profits. It is much more cost-effective to have components made elsewhere, for example, as the company will have access to high quality resources whilst only paying for the actual services provided.

Apart from the attraction of financial gain, outsourcing is a great way for companies to improve the quality of their services or products, saving them time whilst they build lasting relationships with their customers. Outsourcing gives businesses access to a host of world-class skills and resources, which they can utilize alongside freed-up internal resources to become truly customer-focused.

In short, outsourcing enables companies to grow and prosper, whilst building stronger links between them and their customers in the most cost-effective way possible.