In today’s hyper-competitive business environment, managers must always think of ways to evolve and stay ahead of the competition. With lower margin for error, this is even more pronounced for small and midsize companies. One way to stay ahead of the curve is by outsourcing. While virtually all big companies have taken advantage of the global workforce, many smaller firms have not. This may be due to the fear of the unknown or because they do not know the overall benefits outsourcing can bring to their organization. Below I have outlined three compelling arguments of why outsourcing should be seriously considered by small business owners.
1. Cost Savings
Unless you’re a non-profit company, the significant cost savings that can be achieved is reason enough to outsource. Of course, one should do due diligence. And while some will see to the contrary, many will find that the significant cost reductions outweigh the risks. For instance, the following illustrates the cost of a Buyer II in Los Angeles and an Accountant in New York. These figures don’t include other overhead such as cost of office space or HR and IT support. Compared to the Philippines, one can get the same level individual for around $70,000 to $80,000 less. Imagine what that savings could mean for a small or midsize business.
2. Improved Productivity
Improved productivity is also another major reason for outsourcing. And it can be achieved in two ways:
a.Minimized clerical work – with less “busy” work, your local staff who are getting paid U.S. rates can focus on doing what they are supposed to be doing. For a purchasing department, outsourcing can help in following up on purchase orders or expedites while the U.S. based buyer can dedicate time on harder, more strategic issues. For an accountant, he/she can focus on financial analysis and problem solving rather than doing data entry. The list goes on but the main gist is the clerical tasks are taken away to make room for local office to accomplish more important tasks besides completing clerical to-dos.
b.Focus on what you do best – We’ve all been there, doing work that we were not hired to do. Did you give maximum effort when this happened? If you’re like most people, especially if the task had become part of the norm, you did not. Not only were you not as productive as you would have been doing your speciality but also you weren’t happy. By outsourcing such tasks, the U.S. staff gets to focus on what they do best which results in higher levels of productivity.
3. Gain Expertise
Most companies get into business because they know how do something specially well. This thing, called core competency, cannot be everything. It could be great product design or top-notch technology, but not the proverbial kitchen sink. Apple, for instance has great marketing and R&D but chooses to outsource its manufacturing to contract manufacturers who have the expertise in manufacturing electronics at the right price. Small business should follow suit and realize that they can’t do it all.
Surely, it’s tempting for small business owners take on everything themselves. But with limited resources one must exhaust all options to maximize their time and maintain their competitive advantage. Outsourcing can provide such an advantage: from the substantial cost savings that can be reinvested back into the business, to the re-invigorated team providing high levels of production, the onus is on small business to make that leap. Big organizations realized these decades ago when they started outsourcing. And with an extremely competitive landscape, now is the time for small business to jump in, as the global workforce awaits.