Outsourcing by small companies
March 3, 2010
One would imagine that outsourcing is something that concerns only large corporations, who would have the resources necessary to be able to create infrastructure overseas, which could then be harnessed to reap enormous economies of scale. Well there is some truth in it, but small businesses too can reap the benefits of outsourcing by understanding that the benefits that accrue are substantial.
That this has been well appreciated by many small scale companies. Estimates suggest that about 47% such companies are actively considering outsourcing administration, 44% are looking at IT and another 23% at distribution and logistics. Rising costs and vendor pricing are the primary reason for even smaller companies to be favorably disposed towards outsourcing.
There are in fact a number of advantages that accrue to a small business when it decides to outsource. For one there is a marked decrease in your capital costs as your fixed costs get converted to variable costs. At the same time it enables more efficient use of scarce capital.
Outsourcing frees up time and resources which can be better utilized in providing value to customer. Moreover new projects can be taken up far more easily. That apart it enables small firms to benefit from technology and economies of scale which would otherwise be unavailable to them. Not only that, the companies that one outsources to are far more adept and managing the risks involved in their areas expertise, a great relief for harried small firm owners.
However there is a great deal of apprehension among small firms particularly those that outsource to countries like India about quality control. The way to deal with this is to check if certain things are in place. For instance one should work with firms, which have a presence in the United States, get a background check done and ask for the prospective employees to have top notch qualification.
An important reason why outsourcing has become the new mantra for many small firms is that the spread of internet and broadband has led to a proliferation of small firms employing fewer than 100 people. The fact that they are strapped for time makes outsourcing almost a matter of no choice for them. However it is the small companies that employ between 500 to 1000 employees that are the most aggressive outsourcers, particularly when it comes to HR outsourcing.
The prime mover in small companies having a serious look at outsourcing is the fact that technology has brought the price of outsourcing down and the sheer convenience and consequently economy that it offers have convinced the most tightly managed firms to wake up and smell the coffee. Outsourcing as a matter of fact is getting intertwined in everybody’s life. You want to start up an IT consulting business in South Africa, and you want to get a SWOT analysis done. What do you do? Perhaps outsource the work to a marketing research firm in India that specializes on doing South Africa centric work. Truly the global village is here and outsourcing is fast becoming a way of life.
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Several small companies are using Elance, Odesk sites to outsource their work
Not sure how many small businesses are outsourcing their work. In this slow economy they can find quality workers locally and also get tax credits by hiring unemployed workers.
Many small business are outsourcing their accounts handling to offshore locations.
Small business do start to outsource because first and foremost, they would like to start earning from their internet businesses while saving costs on services and secondly, even if they do not have much experience in blogging and making money online, they would like to explore this subject while continuing to save time planning on more targets. This way, they can take advantage of both opportunities at the same, regardless of risks involved.
Rural Outsourcing onshore is a great alternative for reducing the complexity of (offshore) outsourcing and saving money over domestic metro firms.
Very few businesses actually understand the advantages of outsourcing. It’s a fact that outsourcing can be a money saver, but that’s not the one and only reason to do it. As many companies realized during the outsourcing “obsession” of the early 1990s, outsourcing more than a certain level can be an even bigger blunder than not outsourcing any work at all. The flat economy caused many firms into massive layoffs and consequently outsourced functions that were better if they were to be done in-house. Intelligent outsourcing, however, can provide a number of long-term benefits
Outsourcing is one of those things that’s really exploding in popularity now.. if you want to succeed in today’s economy, you really need to look into outsourcing as an option to grow your business..