Why Businesses Turn To Outsourcing and How To Maximize Profit?
2024-10-02
Today, the business sphere is evolving fast, pushing leaders to match this rapid development tempo. Many start searching for talented employees worldwide that possess certain skills necessary for them. As a result, there was introduced such a notion as “outsourcing”, the practice when business leaders hire third-party companies or employees that are capable of realizing certain tasks. This article explores to you the ideas of outsourcing and how this tendency makes employee monitoring software in a greater demand.
What Are The Types of Outsourcing?
We figured out that outsourcing is the practice where businesses hire external companies or employees to perform specific tasks, services, or functions that were traditionally handled internally. There are top 5 outsourcing types that may be implemented for certain business tasks and goals. All of them are aimed at increasing the profit of the company.
The first type to mention is business process outsourcing (BPO) involving the delegation of administrative tasks such as customer service, human resources, and accounting to third-party providers. Companies like IBM or Infosys might be hired to run the development and maintenance of a company's IT infrastructure, such as cloud computing, software development, or help desk services.
The information technology outsourcing (ITO) is one more type of outsourcing implying the realization of IT services like software development, technical support, and IT infrastructure management and the knowledge process outsourcing (KPO) when business leaders hire employees to perform high-level tasks requiring specialized knowledge, such as data analysis, research, legal services, and financial consulting. A business leader may hire such companies as WNS or Boston Analytics to faster complete the project and get more profit.
Companies contract third-party manufacturers to produce goods, enabling cost savings in labor and equipment. This type belongs to manufacturing outsourcing.
The last type is offshore outsourcing that involves hiring firms or employees located in different countries, usually to benefit from lower labor costs. Top countries for offshore outsourcing are:
Here is the table from the provided list:
| Country | Specialties |
|---|---|
| India | IT services, customer support, BPO, software development |
| Philippines | Customer service, BPO, creative services, telemarketing |
| China | Manufacturing, IT services, software development |
| Vietnam | IT services, software development, manufacturing |
| Poland | IT outsourcing, shared services, financial processes |
| Mexico | Manufacturing, IT services, BPO |
| Brazil | IT services, BPO, customer support |
| Malaysia | IT services, financial services, BPO |
| Romania | IT services, software development, financial services |
According to the table above, Asian countries take the lead in maintaining the tendency for offshore outsourcing. Besides, it may relate to companies or a single employee with a required set of skills.
What Are Reasons and Challenges Businesses Outsource?
Common Reasons
There are many reasons why business leaders turn to outsourcing. They are more common for almost all business niches, so each company can find what he needs the most: top-quality employees obtaining unique skills. Post-pandemic times expand the boundaries for outsourcing with the trend to hire remote and hybrid employees. You may get acquainted with the work-from-home, hybrid or in-office work mode and see how the overall tendency keeps further on.
Common reasons to address outsourcing are:
- cost efficiency
- focus on core activities
- access to expertise
- scalability
- improved service quality
- time efficiency
Many benefits when using this trend. For example, if a business has no resources for the project completion internally, they address outside platforms like Upwork, Fiverr, or Freelancer to meet the company/employee you are looking for.
Challenges
As any other business spheres/trends/tendencies, outsourcing brings certain challenges for executives. The most frequently met is communication barriers; even one language speaking may not make the discussion clear.
The second weak point of this practice is the loss of control over specific operations, leading to a potential decline in quality. To avoid this decline, business leaders implement employee monitoring software to track employee work-related activities.
Hiring outside companies requires the transition of the company’s sensitive data. It, in turn, clarifies one more challenge for businesses, namely to safeguard confidential data in a proper manner.
What else to pay attention to? Businesses may become overly dependent on third-party providers. They may not meet deadlines, make big mistakes, or cease operations.
How Outsourcing Boosts Profit?
Why many address outsourcing? To cut a long story short, outsourcing is an efficient strategy for boosting profits for businesses by streamlining activities, increasing efficiency, and maintaining flexibility.
Why does this practice boost profit? Reducing operational costs is one of the primary ways outsourcing enhances profitability. By hiring employees from areas with lower wages, companies can cut labor costs. Additionally, outsourcing reduces the need for office space, equipment. With employee monitoring software integration, businesses can track the performance of remote workers in real-time, thus enhancing productivity high enough despite the reduced physical infrastructure.
Faster project delivery is what makes your profit go up. As many outsourced employees take part in the project realization, the faster the project delivery is. Besides, outsourcing allows businesses to use an almost 27/4 work mode due to different time zones. However, it is recommended to integrate employee monitoring to be confident your remote staff is done well.
Finally, outsourcing offers greater flexibility. Businesses can scale their workforce up or down according to project demands without the long-term hiring of full-time employees.
How Is Outsourcing and Employee Monitoring Connected?
By playing a crucial role in outsourcing, employee monitoring is easily integrated offering versatile tools to track remote employees and their work-related activities. Tracking productivity allows every businessman to be confident in his employees. It provides records on active hours, task completion rates, and time spent on activities.
Besides, employee monitoring software ensures that remote personnel comply with data security policies by tracking access to sensitive information and detecting unauthorized activities. It is very important because you share sensitive information to external companies, then you should take all possible measures to protect data and prevent its leakage.
Moreover, computer monitoring software helps in improving communication and accountability. Tracking allows you to enhance communication between in-house and outsourced teams,guaranteeing their improved accountability and trust.
Case Study: Microsoft's Offshore Outsourcing for Software Development
Background: Microsoft outsourced part of its software development process to countries like India and China to promote talent and lower development costs. The focus was on using a global team to speed up the development of Office 365 and Azure cloud services.
Outsourcing impact: By outsourcing to skilled developers, Microsoft accelerated the development cycle while supporting high standards of product quality. This allowed the company to meet tight deadlines and stay competitive in a fast-moving tech market.
Monitoring integration: Microsoft implements employee monitoring software to ensure remote developers’ productivity, collaboration, and security standards. The software tracked developers’ work hours, coding efficiency, and task completion rates, sending real-time data on individual and team performance.
Outcomes: Microsoft saw a 30% faster project turnaround time and reduced their development costs by 25%. Employee monitoring ensured that the outsourced team remained efficient and aligned with in-house teams, contributing to project success.
Conclusion
Summarizing all the above, outsourcing is a popular and effective practice fostering businesses to look for external resources for projects’ realization. Besides, outsourcing requires applying monitoring techniques to maintain a high productivity rate. Employee monitoring software ensures that tracking activity guarantees your employees done well their work-related activities.