12 Advantages and Benefits of Outsourcing Work

Sometimes, the best way to grow a business is to look outside the organization, where you might discover new advantages. For our team at Hubstaff, we’ve found the benefits of outsourcing tasks are too good to pass up.  

While it might make sense to establish a skilled in-house team, outsourcing work can be a strategic move, especially as companies face labor shortages and increasing production costs.

In this post, we’ll share the advantages of outsourcing work. You’ll learn how you can leverage this approach for better cost savings, increased productivity, 24/7 availability, and other perks. But first, let’s gain a better understanding of what outsourcing is. 

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What is employee outsourcing?

Outsourcing is the strategic process of recruiting external companies or agencies (often from other countries) to take over specific tasks previously managed internally. This approach helps businesses reduce operational costs, tap into a wider talent pool, and enhance efficiency. 

According to the Global Team, the Business Process Outsourcing (BPO) market is set to experience substantial growth, with a compound annual growth rate (CAGR) of 8.5% by 2027. 

In today’s modern workforce strategy, outsourcing has become a standard solution for scaling business operations, speeding up production, and expanding market share quickly. 

For instance, HSBC transformed its HR services by outsourcing and implementing AI-powered platforms and centralized data systems to improve efficiency and employee satisfaction.

Companies often reduce costs and increase efficiency through outsourcing. 

Here, we’ll examine twelve benefits of outsourcing work and highlight how getting external help might be the right choice for your business.

1. Reduce your labor costs

The single most significant cost for businesses is labor — and even that employee payroll doesn’t include the total compensation cost. You also have to factor in: 

• Training
• Healthcare
• Travel
• Technology and equipment

Infrastructure

Outsourcing can significantly reduce or eliminate many of these expenses. Contractors don’t require a desk or office space, and they generally do not receive additional employee benefits. It’s also easier to onboard them, as specialists are typically hired for specific roles or purposes.

Here at Hubstaff, we often turn to our pool of contractors to scale up. If a full-time position opens up, we typically consider our contractors first. 

In this case, outsourcing streamlines the hiring process and lower labor costs create cost savings. Using an outsourcing calculator can further refine these cost-saving strategies by providing precise estimations of potential savings.

There is built-in flexibility through outsourcing as well. In many situations, you only pay for the work you need. If you have 40 hours of work in one week and only 15 in the next, you’ll pay only for the hours worked. This flexibility and the right time tracking tool will help you better budget tasks or projects while maintaining financial targets.

Outsourcing also allows you to tap into more affordable talent pools. For instance, hiring a designer or developer from New York City or Los Angeles will be more expensive, as their cost of living is much higher. 
Learn more about reducing labor costs.

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2. Improve team efficiency through outside expertise

Turning to an independent contractor brings a specified expertise to your company. You won’t have to break in a rookie or develop a new division, which takes time and money. Instead, these experts come in fully trained with niche expertise to help you be more efficient out of the gate. 

Many of these stores may have had a rudimentary online presence pre-2020. However, with health restrictions, many companies were forced to bolster their online stores on the fly. By turning to a contractor or an outsourcing company, an e-commerce business could make the transition a lot smoother.

3. Grow on a budget

Outsourcing can help entrepreneurs grow their businesses without breaking their budgets.

Take public relations. Some companies (especially those small and medium-sized businesses) do not need a full-time PR or communications department. 

However, they still need these professionals to help run social media campaigns or handle news media requests on a one-off basis. Outsourcing to a cost-effective firm that specializes in public relations might make more sense than building your in-house PR team from scratch and navigating down periods. 

You can apply this same strategy to human resources, bookkeeping, legal, or other areas that don’t require constant coverage. 

4. Focus on what’s important

As an entrepreneur, you have a goal and vision for your company. You’re an expert in the product you’ve built or the service you’ve developed, so your focus should be on doing whatever it takes to grow the business. 

Outsourcing services allows you to keep your focus on strategic decision-making and core business goals — not time-consuming administrative tasks that clutter up your day. 

One of the core outsourcing benefits is getting to focus on the tasks, projects, or business processes that you and your team enjoy. That alone helps you tackle hidden costs, reduce stress and burnout, and keep operations running smoothly.

5. Access to global talent

It’s a competitive market for skilled labor as companies crank up their recruiting efforts to fill workforce shortages. Both startups and established businesses are struggling in this department.

Scaling up right now is incredibly difficult, and outsourcing can be critical in filling this void, particularly in the short term. Instead of recruiting candidates to relocate to you, you can tap into companies and freelancers worldwide that specialize in the skills you need.

A larger talent pool doesn’t have to mean taking your business global either. You can also find folks who live in your own country, state, or city who prefer a contract position over full-time work. 

Even if your eventual goal is to have a complete in-house team, outsourcing can help you get there quicker by helping you save until you can make more permanent hires. If you want to learn more, check out the differences between in-house and outsourcing.

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6. International expansion

Outsourcing can be a great way to expand your company’s reach overseas or into neighboring countries.
 
Taking advantage of a remote and global workforce makes gaining access to new markets more accessible and less expensive — especially if you can bypass many infrastructural challenges needed to set up a physical location.

By outsourcing, you can avoid costly relocation packages, equipment needs, and rent for a new office. But even without a physical office space, having team members in new places helps you better understand new markets and spread the word.

7. 24-hour coverage

A global talent pool means you can create availability beyond the traditional eight-hour workday without overworking employees. 

Through outsourcing tasks and proper planning, there is no reason for production, IT, or customer support to shut down. By hiring freelancers in other time zones, you can create a 24-hour production cycle. 

With teams working around the clock, managers can have completed work waiting for them in their inboxes when they start the day. You get projects back to clients faster than ever before. More importantly, it provides an opportunity for 24-hour customer support and security to improve the customer experience and grow your business. 

8. Increase productivity

When your team gets slammed, outsourcing can be a lifeline that helps your employees stay on task when their workloads increase.

Some businesses go through predictable busy seasons. Other times, they cannot expand their permanent workforce fast enough to keep pace with demand. Fortunately, there are contractors or freelancers to handle just about every type of work. 

You can bring them on to pick up responsibilities outside the core scope of your work. For example, suppose your business is ramping up for a social media campaign. In that case, you can outsource this work rather than adding it to the plate of an already busy communications team. 

This setup allows your professionals to focus on their best work — especially in anticipated demand surges. Looking outside the company can help you cut human resources and benefits administration costs while reducing your reliance on full-time, transient team members.

9. Gain a competitive edge

Outsourcing can help small businesses punch above their competitive weight. Companies can maintain a smaller core of employees while accessing resources around the country (or around the globe) that allow them to tap into experienced talent or offer more services at a better price than their competitors.

When profit margins are tight, providing better customer service or quicker turnarounds on projects can make a huge difference in client acquisition and retention.

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10. Third-party contractors are motivated

Outside contractors are motivated to keep you happy. All employees should be, but third-party providers have no security beyond the project you’ve hired them for or the end of the contract.
They’ll lose out on potential client referrals and testimonials if they do sub-par work, so it’s in their best interest to perform at their best.

However, don’t treat a service provider or the contractors they provide as disposable. Focus on finding people you trust to support core business functions. That way, you’re achieving cost savings while maintaining the reliability of your offerings. Always treat people the way that any person should be treated.

11. Internal staff development

On-site outsourcing can pay dividends beyond just getting a project completed. When you bring in outside experts, it’s an opportunity for your core staff to pick up new skills and perspectives just by working alongside people with different experiences. Outsourcing is especially beneficial if you have a younger team that’s looking to develop new skills.

Also, your staff will be able to better hone their craft by having more time to concentrate rather than being overworked or trying to tackle responsibilities beyond their primary skill set.

12. Innovation through new perspectives 

Outsourcing is the second name for innovation, a fresh way of collaborating. An outsourced team comes with new perspectives and creative problem-solving skills. A culturally diverse workforce also allows for a new way of team building while challenging traditional limitations. 

Unlike in-house teams, tapping into an external talent pool helps you access different ideas and expertise. A highly trained workforce aligned with your organizational needs can give your business a competitive edge.

For example, a mid-sized health care company once outsourced its mobile app development to a Scandinavian team. The outsourced team designed an intuitive interface with an add-on mental health check-in feature (based on a local trend) that is unique to the business. The added feature significantly increased user engagement and differentiated the app in a crowded market.

Industry-specific benefits of offshore outsourcing

If all the benefits listed already aren’t enough to persuade you to take your operations globally, let’s take a look at some industry-specific advantages of offshore outsourcing. 

Benefits of outsourcing IT and call center services

• 24/7 Customer Support. When you open the door to professionals around the globe, you can create 24/7 coverage for IT services. This way, your clients can have their questions answered even well outside of normal office hours.
  
• Cost savings. As mentioned above, 24/7 coverage is crucial in IT. Instead of racking up overtime with internal teams, hiring around the globe helps you create asynchronous shift schedules and find favorable exchange rates.
  
• Access to specialized skills. The wider the talent pool, the easier it is to find the credentials you need to benefit from outsourcing call centers and IT teams. 

Benefits of outsourcing software development

• Faster Time-to-Market. Similar to the 24/7 coverage mentioned in the IT space, asynchronous development teams help you streamline workflows and build better go-to-market strategies for future projects.
  
• Wider talent pool. Software development, despite growing in popularity, is still a pretty niche skillset, with 2.5% of the US population working as developers. It never hurts to cast a wider net. 

• Cost efficiency. Development work is scarce for a reason. It requires a niche skillset that isn’t cheap. Looking outside of your country can help you save money and build a larger team. 

Benefits of outsourcing customer service

• 24-hour coverage. Much like with IT teams, the best companies have customer service teams available around the clock. It’s a lot easier to accomplish with outsourcing.
  
• DEI, multilingual needs. If you want your products and/or services to reach a wide audience, your customer support should be equally diverse. Whether it’s e-commerce, real estate, or another field, diversity goes a long way in making customers feel comfortable. 

Benefits of outsourcing payroll and accounting services

• Wider knowledge base. If you’re outsourcing work or invoicing overseas clients, you might as well match them with a team that has diverse knowledge of international payroll, tax compliance, and accounting, right?
  

Time savings. Outsourcing payroll frees up time and resources for accounting and payroll services. This allows these teams to focus on core work. When you look beyond the benefits of outsourcing accounting services, time tracking, and employee timesheet tools can come into play here, too. 

FAQ

1. How does outsourcing affect customer service and satisfaction?

Outsourcing customer service can be an added advantage to businesses looking to scale cost-effectively. When your company outsources customer service teams, it can leverage better outsourced service and save costs by paying in foreign currency. A dedicated team working 24/7 also improves response times. Overall, it’s a lucrative approach for businesses looking to stay competitive. 

2. How do you measure the success of an outsourcing partnership?

To understand your outsourcing partnership’s success, you must consider financial and non-financial factors.

Start by evaluating these key metrics:

• Return on Investment (ROI)
• Cost-effectiveness
• Productivity gain
• Improvement in service quality 
• Customer satisfaction 

Additionally, you need to measure whether the partnership aligns with your long-term business goals, communication needs, and flexibility. 

3. Is outsourcing the same as hiring freelancers?

Outsourcing is different from hiring freelancers. Outsourcing refers to hiring third-party companies contractually to handle entire business functions. On the other hand, freelancing involves hiring individuals as professionals for specific tasks or projects. Freelancers work independently, full-time or part-time, and decide their hourly rates. Outsourced teams are mostly tied to an organization, determining how many hours they’ll work and pay rates. 

Final thoughts

Outsourcing is finding the most efficient way to run and grow your business. It’s not perfect for every situation, but there are many advantages to developing and retaining your internal staff. Hiring contractors can help you handle a wide range of challenges while controlling costs.

Turning to an outsourcing company may help you build a more robust future strategy without giving up any business process or creating financial risk. One way to achieve this is to use robust reporting technology, like Hubstaff time tracking.

With detailed reports and real-time data on hours worked and spending, Hubstaff can help you be more successful outsourcing by helping you create a productive, affordable, and efficient global team to take your business to new heights.