➔ What is Outsourcing in Business?
➔ Types of Outsourcing
➔ Areas of Workforce Outsourcing
➔ Is Workforce Outsourcing ideal?
What is Outsourcing in Business?
Since 1989, businesses have used the outsourcing of labor to reduce costs that would otherwise be incurred, regardless of the efficiency of the business outsourcing is transferring responsibilities that should have been handled by in-house workforce to specialized third-party while core business operations are focused on. Third-party providers also called service providers have their employees set to take up roles when hired by an outsourcing company. An outsourcing company is the party that hires an outside company to do tasks its traditional workforce formerly performed.
Outsourcing workforce in business is capital-intensive and less labor-intensive. A business may decide to take this approach for reasons including the urgency of project results which its traditional workforce would probably need training before commencement or shared focus on core responsibilities. Many others outsource workforce in order to reduce paying bills for full-time employees who at times are not engaged. Other cost minimisation includes substituting rigorous labor costs for capital costs. More often than not, outsourced responsibilities are delivered with excellence from service providers and at a price favorable to the outsourcing company. Outsourcing offers the involvement of a wider range of services without having to employ new staff.
Services that can be outsourced range from security, cleaning agents, customer service, human resource, systems management, accounting, financial modeling, payroll, and the list goes on as it best suits a business. Any company may opt to outsource any position, but it should be conscious that some tasks, like monitoring the company’s financial books, are sensitive and should be protected from externalities to prevent the loss of proprietary information.
Types of Outsourcing
● Onshore Outsourcing: as the name implies is hiring service providers in the same country as the hiring company. It is also called local outsourcing. Outsourcing locally is helpful as language may not be a barrier in communication. Other advantages include the opportunity to meet the service providers in-person, having common cultural grounds. However, a business might still choose services not onshore because it is usually expensive outsourcing locally.
● Nearshore Outsourcing: this tells that it is not within a business immediate environment but it is around and close to its reach. This is outsourcing workforce within the same continent or close regions. Due to its lower cost, use of the same or nearby time zones, and reduced shipping delays, it is less unfavorable. The advantages of onshore and offshore outsourcing are combined in nearshore outsourcing.
● Offshore Outsourcing: this kind of outsourcing happens over long distances which is labor and capital efficient. Offshore outsourcing gives an opportunity to employ the best hands in that country not available within the local environment in a cost-effective way yet getting excellent results. Shortfalls to this type of outsourcing includes language and communication barriers, timezone disparities, authenticity of service provider, reliability to deliver when due amongst others.
4 Major Areas of Outsourcing
For purchase, installation, or maintenance, tools and equipment used in the production industry require specialist knowledge. To oversee system operations, a company may require IT engineers. These are the operational services necessary to control a company’s technical side.
In order to arrange a company’s processes, such as managing employee interactions, this involves enlisting the help of professionals in related industries. In this sector, outsourcing might be used for the recruitment process, legal process, or knowledge process. In order to achieve the company’s objectives, knowledge process outsourcing includes research, fact-finding, and foundation analysis. Outsourcing legal procedure entails meeting constitutional requirements for services, rules, and legal proceedings. Outsourcing the hiring and discharge of employees, the knowledge of job openings, and recruitment assistance are all included in the recruitment process.
Employing companies that provide more general services is what this entails. They provide both business and technical services. A few examples are companies that operate under the same brand and provide both security and janitorial services.
As the name suggests, this is concentrated on hiring the particular capabilities, who are typically with a license to function in that capacity. This comprises chartered accountants, business strategists, designers, and so on. Professional outsourcing makes use of knowledge, contacts, and resources that are not directly held by the business.
Is Workforce Outsourcing ideal?
Growth is typically a significant goal, though company goals and visions vary. However, since some firms like to maintain control, outsourcing might not be the best strategy for all businesses. However, it offers a range of capacities, flexibility to adjust to new working circumstances, emphasizes strength, lower prices, access to high assets, and great talents. The benefits of outsourcing are excellent instruments for expanding a company and successfully achieving business objectives.
Emmanuel Otori has over 9 years of experience working with 100 start-ups and SMEs across Nigeria. He has worked on the Growth and Employment (GEM) Project of the World Bank, GiZ, Consulted for businesses at the Abuja Enterprise Agency, Novustack, Splitspot and NITDA. He is the Chief Executive Officer at Abuja Data School.