Outsourcing

By: Mr. Shashank Mundle - 1st October, 2019

Outsourcing is the practice of using outside agencies to handle work normally performed in-house. The outsourced tasks are usually mundane and/or repetitive functions which can be easily carved out. The concept is familiar to most businessmen today. Companies, large and small, routinely outsource their payroll processing, accounting, distribution, and many other functions. Many large companies turn to outsourcing to cut costs. Consequently, entire industries have sprung up to serve outsourcing needs.

Amongst others, some important benefits of outsourcing are:

1. Outsourcing converts non-variable or fixed costs into variable costs and makes available capital which can be utilized by the Company elsewhere, more productively.
2. The cost structure and economies of scale which outsourcing agencies enjoy can provide significant cost benefits to the Companies which outsource as compared to them doing everything in-house which locks up expensive capital and manpower which can be put to far more profitable uses.
3. Engaging staff for repetitive and mundane jobs which can be best outsourced can prove to be expensive and time consuming. Attrition results in many hours of training which is required for new recruits hired to replace those who have exited. Outsourcing enables a Company to use its human resources where they are most needed.
4. New ventures can be started faster and with better utilization of resources as a good outsourcing firm can roll out processes much faster and more efficiently. If the same tasks have to be done in-house a Company may need considerably more time to recruit and train staff to achieve the same results.
5. Manpower resources are limited. Every manager has limited time at his disposal. Therefore outsourcing of peripheral activities can free up valuable executive time which can be used to focus on core activities.

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