Globalization and innovative technologies give the company the opportunity to save resources and optimize business processes. Outsourcing and Offshoring are the most common methods.
The delegation of part of the functions to other companies, on the one hand, allows you to reduce costs, on the other hand, focus on the development of the main areas of activity. Besides, this is an additional way to attract external resources – knowledge, experience, engage fresh personnel without excessive obligations and risks.
In many ways, these two terms “offshoring” and “outsourcing” have the same meaning: transferring some of the work to non-staff employees.
Nowadays, the costs of offshore production are growing, and there are new reasons for returning business to Western countries. It concerns the strengthening of logistics function, improve the quality of finished products and increase the shaky image of most well-known brands.
Therefore, there are some good prospects for outsourcing. The idea is to occupy freeing niches. It will allow you not to lose time and money to balance the final cost of production, while observing the principles of quality.
What is Outsourcing?
Outsourcing is the process of a company transferring part of the production or business processe of another company that is an expert in this field. By delegating processe that isn’t related to the main production, but is strategically important for the outsourcer, the company makes a mutually beneficial exchange.
Outsourcing is the process of transferring part of a production or business process by a company to another company that is an expert in this field.
The transfer of processes, which not related to the main products of the company, is very important for the outsourcer. It is a mutually beneficial exchange of resources.
Here are a few reasons why a company executive should use outsourcing for business:
– You save money. Outsourcing certain functions of the company (accounting services, IT, PR and marketing, call center) will help reduce operating costs and increase profits. Thus, you translate fixed costs into variables and become more flexible.
– The delegation of certain functions saves time and provides an opportunity to develop. When it becomes into small and medium-sized businesses, outsourcing helps to concentrate on key areas of activity and more rationally spend human and financial resources on administrative and operational tasks.
– Outsourcing helps companies to keep compact. It is very useful, if you do not want to maintain a large staff and create a complex of corporate structure. Outsourcing can also be used, when you want to reorganize a business or optimize operating expenses.
What is offshoring?
Offshoring is the delegation of certain functions of a company to organizations from another country in order to reduce costs for business tasks and processes.
Here are some of the benefits to use offshoring in your business:
– Lower costs, higher efficiency. Offshore companies offer customers the necessary and sometimes unique opportunities that are inaccessible or incomparably expensive in developed countries.
Unique skills. The advantages of offshore companies are not only low labor costs, but also unique skills. By paying their employees low salaries, offshore companies are able to hire more mid-level managers who can devote time to developing subordinate skills and debugging business processes, while this is an unacceptable luxury for western companies. By expanding cooperation with offshore companies, clients themselves can acquire new special skills, thereby moving into more profitable business areas and attacking related markets.
Control of finances. The transfer of operational processes abroad, gives the company the opportunity to establish tight control over the level of expenses: the functions of credit analysis, support of a call center, tax analysis and work with financial documents.
The risks and benefits of using outsourcing or offshoring:
Outsourcing risks include inconsistencies in the interests of customers and suppliers, increased customer dependence on a third-party company, and the lack of their own highly professional knowledge about business operations outsourcing.
But also, it is an opportunity to take advantage of the special skills, efficiency and flexibility of an outsourcing company.
Offshoring means placing part of the business in another country. There are geopolitical risks, language differences and poor understanding. The advantages are lower production costs, higher availability of qualified specialists at a low price and more efficient work through the global talent pool.
The best solution for the market as in all depends on need of participants. If you need a high level of quality and control, outsourcing can be the best solution. If you need low costs and a distributed business, offshoring will remain an effective model.