Updated
June 28, 2024
Written by
Alyssa Maano
Before anything else, what is outsourcing?
Outsourcing is a familiar concept to companies of all sizes. It refers to hiring external parties to perform business functions on behalf of the company. But, why do companies choose to outsource work? And what are the benefits of outsourcing in this rapidly evolving and dynamic global market?
For small enterprises, in particular, outsourcing is a strategic way to streamline operations, reduce costs, and have access to specialized expertise. As such, many outsourcing companies have emerged to meet their business needs and facilitate sustained growth.
In this article, we’ll highlight the key benefits of outsourcing for small businesses, such as the following:
Small businesses are always seeking ways to reduce operational costs without compromising the quality of their output. Outsourcing provides this balance by granting a low-cost option in exchange for guaranteed high-quality services.
In fact, the International Organization for Standardization (ISO) reveals that businesses can save 15% on average when they outsource a part of their operations. Moreover, most outsourcing companies are located in offshore regions in Southeast Asia, where labor costs are much cheaper.
When you outsource tasks to an external firm, you reduce expenses in various areas, including labor, infrastructure, and technology. Let’s look at the different ways outsourcing reduces costs:
Hiring in-house employees is a heavy investment. Aside from basic pay and taxes, you need to process employee benefits and conduct regular training sessions for skill enhancement which require a huge sum. Investing in professional trainers or online courses can hurt their finances further.
For smaller companies, this model isn’t sustainable. Through outsourcing, they can have fewer staff members to hire, pay, and train. Thus, they can allocate their financial resources to their core staff and other strategic business endeavors.
Establishing an internal customer support department requires a larger workspace to accommodate all employees. This could mean expanding your current office, renting a new office space, or constructing another corporate building, which demands a huge investment of time and money.
Moreover, having a bigger workspace means more energy is needed to run the place, incurring higher electricity bills and other utilities.
With outsourcing, these expenses won’t be necessary since you are partnering with a separate entity with its own office, power supply, and internet connection.
By contracting a service provider, companies won’t have to invest in additional equipment and technologies to perform business functions effectively. These technologies include:
For small businesses, having access to a team of experts is a priority. Leveraging external talent not only improves efficiency, it also fosters growth and success. With this opportunity, they can enhance specific business domains that require individuals with the right skills and proficiency.
Some commonly outsourced functions that require specialized knowledge include:
Entrepreneurs who have just started their operations from their home offices typically hire virtual assistants (VAs) to manage tasks like order management, inventory, scheduling, and documentation. Outsourcing companies offer skilled virtual assistants in specific business niches that clients can pay per hour.
For businesses that deal with purchases online or over the phone, investing in external customer support services is the way to go. Aside from voice support, agents can also answer customer queries through chat or email using calm and professional language. Some companies also offer multilingual support to cater to a global audience.
Small businesses or startups can outsource their sales and marketing teams to determine current trends and translate them into fruitful marketing strategies. With the help of outsourcing, they can grow their following and increase brand awareness.
E-commerce businesses can also outsource to a dropshipping service provider that can handle the procurement, procuring, storage, and shipping of their products. Logistics experts from a dropshipping company can fulfill orders quickly and accurately while ensuring they end up where they need to be.
If there are no financial experts on your team, you can take advantage of contracting an external accounting firm to fulfill tasks, including bookkeeping, making financial reports, and computing taxes.
A third-party provider can also provide exceptional human resource management services to take on duties such as recruitment, payroll management, employee-benefit processing, and other HR tasks. Outsourcing companies often employ competent HR staff that can bring in the best talent for your organization.
IT is one of the largest outsourcing industries. According to Grand View Research, the global IT outsourcing market is predicted to reach 1,180.42 billion in revenue by 2030.
IT experts from external partners are capable of delivering efficient and flexible IT solutions like networking infrastructure, cybersecurity, and hardware and software support to ensure effective operations in smaller companies.
Small corporations must work twice as hard to keep up with dynamic business environments. They must focus on forming better strategies to improve their products and services. However, concentrating their efforts on core business activities can be challenging if they have to shift their attention to non-essential tasks.
Through outsourcing, small businesses won’t have to worry about non-core tasks. With access to a global pool of talent, they can free up their internal resources and allocate them to more vital business aspects like research and product development.
For instance, a small clothing retail company in the United States can hire a dropshipping service provider to handle all shipping logistics. Through this strategy, their core team can focus on improving designs and audience reach.
In outsourcing, scalability and flexibility go hand-in-hand. Due to fluctuating demands, they may not require manpower during times when customer demand is low. However, during peak seasons, they may not have enough resources to hire new employees.
With an outsourcing partner, companies can freely scale up or scale down their operations as needed. Resources like staff, infrastructure, and technology can be seamlessly adjusted to meet these demands.
Meanwhile, flexibility refers to the capacity of an outsourced provider to remain agile and quickly adapt to changing business requirements. For instance, if a project’s deadline is moved to an earlier date, the external party must reallocate their resources, adjust their strategies, and even adopt new technologies to accelerate the project’s progress and meet their client’s expectations.
Time means everything for small organizations. With inefficient processes, they could be setting themselves up for failure. As they juggle getting deliverables done and increasing work efficiency and productivity, many of them end up with overburdened workers and stagnancy.
Outsourcing specific business functions to another company is a surefire way of boosting efficiency. With their expertise, an external vendor can streamline repetitive tasks remotely, helping clients achieve their desired output on time.
In a highly competitive market, having a highly efficient workforce is imperative for long-term success. With exceptional service and faster turnaround times, customer satisfaction can also be guaranteed, leading to higher retention rates and profit.
Advanced technology is the backbone of outsourcing solutions. When a small enterprise invests in outsourcing, it gains access to a myriad of tools that may not be available in-house. This opportunity allows them to remain competitive without significant investment in software solutions.
Since most outsourced processes are labor-intensive and time-consuming, external providers invest in technologies that streamline operations, including:
Third-party providers leverage cloud-based platforms for flexible storage needs while ensuring high data security. This makes it easier for them to deliver scalable solutions to their clients, regardless of their company size.
Artificial intelligence is revolutionizing outsourcing solutions by automating routine activities such as sorting and analyzing customer data, scheduling follow-up calls or emails, and updating customer records. Some outsourcing companies also implement smart AI chatbots to aid customer support agents by giving quick customer resolutions.
Knowing the pulse of their customer base is a crucial element for driving up sales and revenue in small businesses. Outsourcing partners offer clients a complete perspective of their overall performance and how they impact customer satisfaction through data analytics.
To easily keep track of customer information, external providers integrate CRM software to have a centralized repository of all customer transactions and interactions with a business. This is a critical tool for understanding customers and crafting personalized experiences.
Another indispensable asset in modern outsourcing is an omnichannel communication system. With a unified communication channel, customers can engage with a business in the most convenient way, whether through chat, call, email, or social media. It also allows them to jump smoothly from one communication to another.
For example, after chatting with an AI bot, a customer can be redirected to a real agent through a phone call without having to repeat their concerns.
When a small company chooses to outsource to an external vendor, it also shares operational risks with its provider. In most cases, outsourcing can strengthen risk management strategy by filling in skill gaps in the workforce, providing experienced professionals and round-the-clock services, and maintaining an agile business model.
With these strategies, companies can mitigate potential risks that may arise during day-to-day business operations, like human error, security breaches, or non-compliance with regulations.
Outsourcing allows small-size enterprises to tap into global talent. With a culturally diverse workforce, they can unlock doors to international markets. They can enter these markets easily since their offshore providers are knowledgeable about local industry trends necessary for business expansion.
Outsourcing offers small businesses key benefits such as cost savings, access to specialized expertise, and improved operational efficiency. By leveraging these advantages, small businesses can focus on core activities, achieve scalability, and enhance competitiveness in the market. Investing in business outsourcing services can be a strategic advantage, enabling growth and innovation while mitigating risks.
Consider outsourcing with a viable partner such as NMS that can empower small businesses to thrive in a dynamic global market, ensuring long-term success and sustainability.Take your business to the next level. Contact us today!
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