Why Businesses Use Outsourcing?

Useful Insight into Outsourcing for Head Contractors and Subcontractors

The outsourcing market has grown dramatically since 1989 when it was recognized as a business strategy. Annual outsourcing encompasses about 300,000 positions. Besides, as to the 2018 data, the market is worth around $85.6 billion globally. So, what are the reasons businesses implement outsourcing and what criteria they base their subcontractor choice on?

Why Businesses Use Outsourcing?

According to the research involving digital companies’ insight into this business strategy, these are the major reasons head contractors would use outsourcing:

1. Cutting expenses on full-time staff maintenance
The demand for employees with specific qualifications may be temporary, varying by the project. It would take more finances to hire people for just one task.
2. Speeding up business upscaling at the expense of other businesses
There’s a false stereotype that companies upscale only as they increase their staff count. By outsourcing, businesses can grow and establish their authority at the expense of their subcontractors.
3. Lack of time for employee training and control
While there are a lot of online resources for self-education, the process should be controlled by a supervisor or a manager. It takes a lot of time and money, so it’s easier to use other companies’ services.
4. The need to focus on a different direction
To establish and organize a company, there are a lot of inside factors to focus on. Those include analysis, media planning, goal-setting, and strategies. And as to IT and design, outsourcing is an efficient way out.
5. Optimizing company profitability
Using other companies’ staff is usually cheaper than creating a new inside team. The reasons are:

  • The task the head contractor needs to be done is the main speciality of the subcontractor
  • The country the chosen partners are from has lower salaries, rent, and other fees
6. Broadening the list of services the company provides
With limited offer comes a limited piece of the market to target. Outsourcing helps encompass a wider range of services to provide potential clients with.
7. Getting help with presale
In case the client needs some in-depth details about the final product/project, outsourcing a part of customer support would be a good idea.
8. Adopting experience
Any partnership between businesses of different fields would bring something new to each participant.
The Most Important Subcontractor Choice Criteria
There should be a fine line between the head contractor’s subjective emotions and considered criteria. Those who base their choice on the first impression often have a bad outsourcing experience. So, the main points to base the decision on are:

  • Competence
    The most important factor that describes candidates’ skills, experience, and knowledge.
  • Reviews
    The information the candidates provide isn’t enough. It’s also important what their clients and partners think of them. The goal is not to focus on the tone of the reviews but gather the facts about productivity, trustworthiness, etc.
  • Production capacity
    The amount of hours potential subcontractors can devote to the partnership shows how well the inside strategies work within those companies. The ratio of their production capacities and the size of the businesses plays a big role in evaluating this factor.
  • Portfolio
    A portfolio will roughly show what the head contractor will get out of cooperation with a particular candidate. So, while the above factors are mostly theory, this is practice. It’s important to remember, though, that a lot of projects might be under non-disclosure agreements (NDA).
  • Resilience
    Resilience and adaptability are key features of any good team. A rapid change in conditions, directions, or deadlines shouldn’t ruin the final result.

In conclusion, outsourcing has become an integral part of the business world. About one-third of client-oriented tasks given to subcontractors. It helps companies grow without having to maintain new full-time employees. It gives more time to develop inside a structure and focus on analytics and management. An experienced head contractor should look for proper portfolios, resilience, and relevant production capacities in their subcontractors.

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