How does Outsourcing save you Money & Time?

How does Outsourcing save you Money & Time?

July, 03 2023

Did you know that India has been the world's largest and leading offshore IT and BPO destination since the 1980s?

Yes, that’s a fact. Ever since globalization has impacted the world, outsourcing has become one of the most famous and economically powerful practices of the global economy. But why do companies outsource their own work to someone else?

Before we answer the question, let’s understand what outsourcing actually is!

Outsourcing is the practice of delegating specific business processes, functions, or tasks to an external third-party service provider to perform certain activities on its behalf. These external service providers could be located either domestically or across the border, depending on the outsourcing arrangement. Different areas of business functions or tasks can be outsourced, such as information technology (IT) services, hiring support, customer support, finance and accounting management, research and development, and many more.

Now, coming back to the main question, why do organisations outsource their projects or business functions to other third-party vendors? Outsourcing not only allows them to manage business functions of any scale but also helps them cut down on business costs by 20%–30% and enhance the productivity of the internal employees.

How does Recruitment outsourcing save money and time? Let’s take a look at the different ways outsourcing can reduce expenses and time for organisations.

Reduced Hiring Costs

One of the biggest challenges that companies face is the high cost of hiring. However, they can reduce the cost if they outsource it to an external third-party organisation. Outsourced companies only pay the price of the service package to the outsourcing companies, therefore it saves money and time involved in organizing recruitment drives, running hiring campaigns and hosting long interview sessions. Companies can also save money on payroll taxes and employment benefits such as provident funds, gratuities, medical insurance, travel allowances, and pension plans.

Savings on Infrastructure Requirements

A bigger in-house team calls for more space, more electricity, and several tools and resources. To meet the requirements of the increasing workforce, the companies may end up renting another office space, expanding the current one, or building a commercial space from scratch, all of which take considerable time and money. However, outsourcing the business vertical or project to an external party can reduce these costs without affecting the end objectives.

Savings on Training Employees

Due to rapid globalization and digital advancements, it is important that the in-house teams are well-updated on the latest technologies and functional areas. This calls for setting up an L&D (Learning and Development) team that will organise leadership summits, learning workshops, and initiatives to train the in-house employees on global trends and updates. However, outsourcing a project or a department helps the organisations save considerable time, energy and resources on conducting these training campaigns for the in-house employees.

Lesser Commitments and Timely Delivery of Services

When an organisation decides to outsource their services to a third-party organisation, both parties come to a mutual agreement and sign an SLA, or service level agreement. In this agreement, the outsourcing company clearly defines the timelines for delivering the project or task. The expectations and negotiations are discussed until the contract is valid. However, when organisations hire an in-house member for the same task, there are bound by certain commitments such as paying a fixed composition, offering hikes as per company policies, incentives, insurance plans, provident funds, etc., which can be an added financial burden for these outsourced organisations. However, this issue is resolved when companies outsource their work to an external agency as they only pay a fixed amount for the services they would like to avail.

Wrapping it Up!

Once companies start outsourcing their business operations, the impact could be clearly visible in the company’s returns, sales, and revenue. Outsourcing allows the in-house team to work on core operations, improve customer experience, and prevent unnecessary expenditures related to hiring for the same role. All of these added benefits allow organisations to regulate their finances in proper channels and enhance their team productivity.

Lastly, while outsourcing may be a smart choice for companies these days by helping them to save time and money in many instances, on the other hand, it also requires effective communication, clear expectations, and a well-managed relationship with the outsourcing partner to ensure optimal delivery of end-objectives and results.