What is outsourcing and what it is designed for?
In recent years, the market for permanent employee selection has almost halved, and outsourcing companies have taken their places.
What does outsourcing stand for? It’s a transfer of non-core functions of the company to third parties. Not every company can afford to maintain its own security or cleaning service, for example. That’s why it’s easier for them to turn to specialized organizations from time to time, and thus save on recruitment, training and maintenance of personnel.
Since the beginning of the 2000s, outsourcing has been widely used by many international companies. So, Nike outsourced all its production functions. The company itself is only engaged in the development of new designs and sales of sport shoes and clothing in its stores. Everything else is performed by contracting organizations concentrated in other countries. And Nike’s revenue is steadily rising.
Reasons why companies use outsourcing services:
- to reduce costs;
- to focus on core business objectives;
- to resolve performance issues;
- to improve service quality;
- to gain access to intellectual capital;
- to manage the business climate;
- to make a transformation.
By delegating responsibilities to professional outsourcing services, you eliminate redundancy, reduce costs and increase efficiency of your business.
As world practice shows (Google, IKEA, Kodak, Nike, etc.), outsourcing has a lot of advantages, among which following are essential:
- Reducing labor costs. As mentioned above, the employing company doesn’t pay for personnel training, doesn’t buy equipment and software, doesn’t spend money on maintaining motivation. Outsourcing organizations are themselves engaged in training their staff in necessary format, control the skills obtained and stimulate with bonuses and premiums. For example, technical support outsourcing provides training to its personnel according to their necessities and aims.
- Getting rid of social obligations. The outsourcing company itself pays for sick leave and holidays, transfers deductions to the tax, pension fund and health insurance fund.
- Independence from circumstances. Under the contract concluded, the outsourcer undertakes to provide services on time. The work will be completed on time, even if freelancers quit, fall ill, go on maternity leave or vacation.
- Improving the quality of non-core services. Customers get access to intellectual capital of highly experienced organizations which know its business.
- Focus on the company’s core business. You won’t need to spread your efforts on all processes, so entrust non-core functions to professionals and free yourself and the HR team from unnecessary work.
On the other hand, we can identify some shortcomings, although they aren’t numerous: becoming dependent from an outsourcer especially in conditions of competitor’s absence; bad faith, disclosure of confidential information.
To avoid falling for the bait of unscrupulous outsourcing companies, carefully study the firm you are planning to hire. Read feedback from other customers, analyze company’s portfolio and sign agreement with penalty in case when outsourcer violates work deadlines and provides bad quality service.
As experts predict, demand for outsourcing will only grow, while the search for permanent staff, on the contrary, will decrease. The pandemic and crisis have stimulated many corporations to invest in digital transformation, attract remote workers and pay attention to cloud systems. Outsourcing companies help to cope with these tasks.