Effect of Outsourcing Strategies on the Performance of SMEs



First of all, what is outsourcing, and what are outsourcing strategies?  

Hiring third-party services by organizations to conduct job functions, mainly performed by the in-house staff, is outsourcing. And, outsourcing strategies are plans that are created, based on the roles or activities that require involvement of external services to achieve better execution & production, when a company cannot perform the tasks with its internal resources. 

Although the evolution of outsourcing dates back to the 1970s and 1980s, it was only during the 1990s that it got recognized as an essential business plan. Nowadays, many companies are embracing this business strategy, mainly due to several benefits that it offers. 

Including the enhancement of customer satisfaction, saving costs, and improving quality and productivity, the objective of both the large enterprises and SMEs are considerably similar. However, small & medium enterprises own limited resources, and outsourcing some of their non-core tasks, like accounting, marketing, sales, IT management, data entry, content creation, and customer service, to an external team proves worthy. This external association reaps countless profits as the company can focus on their fundamental competencies of the business.

According to Jagdish Dalal, CEO of Corporate Affairs, “Companies are past the basics of talking about outsourcing and offshoring. Executives understand outsourcing now and want to know how to effectively use it in their organizations.”  

SMEs need to understand the leveraging benefits that they can gain through outsourcing while having explicit knowledge about the work they want to outsource.  

Effect of outsourcing strategies on SMEs  

Outsourcing non-core tasks help SMEs to be more productive, resilient, and efficient while maintaining costs. The effect of outsourcing strategies is highly commendable if it is adopted and nurtured widely. However, some challenges occur due to the lack of outsourcing the right activities to an external firm. 

  • Qualified professionals  

Companies providing outsourcing services have proficient experts who possess the best skillset. By outsourcing, companies gain access to a pool of specialized resources who are competent in delivering quality outcomes, including saving time and money from the tedious process of hiring in-house employees and spending on the training, recruitment and infrastructure.  

One of the largest outsourcing industries is IT. Depending on outsourced companies to handle tech problems or any IT functions leads to a notable impact on the profitable growth of SMEs.  

  • Low labour cost 

The prime objective of every company, irrespective of being small, medium, or large, is to reduce operational cost without impacting quality and productivity. Contrary to hiring full-time employees, finding & hiring outsourcing companies is much more reasonable.  

Businesses can outsource tasks, depending on the requirements or job roles. Outsourcing also helps save expenses and initial capital requirements for SMEs on software tools, office space, devices, etc. Also, it’s a double jackpot for the companies as outsourcing offers them experts at the best prices and helps them focus their in-house resources wherever they are needed the most.  

  • Focus on the fundamental aspects of business  

Outsourcing peripheral tasks and positions allow most SMEs to focus on their fundamental aspects, that leads to increased productivity and efficiency. It also helps organizations set their priorities with more clarity.  

For instance, many social media agencies often outsource their PR-related tasks because they do not have the right resource. Many opt for a mixed-approach, having an in-house team who conducts all the tasks, such as strategizing campaigns & scheduling shoots, additionally outsourcing other assignments to the external firm. So, instead of shifting your focus from actual objectives to recruiting and training, outsourcing is the best option, indeed. 

  • Access to latest technologies  

Most well-known outsourcing companies have the latest technologies, frameworks, and management tools that they use for projects. Through outsourcing, companies can access the most advanced technologies, which would have cost them a whopping amount if they invested in them. Furthermore, the outsourcer gets constant support from the outsourcee, such as monitoring technologies, updates on the latest development, and preventing difficulties. 

  • Increased efficiency  

Outsourcing specific business tasks and roles help SMEs to increase efficiency, resulting in boosted sales, growth without compromising the quality, and an essential competitive advantage in the market. One of the best effects of outsourcing on SMEs is, they have the option to select an outsourcing company or team that specializes in a specific area or possesses a particular skill set.  

For instance, if an organization is looking for an account manager with a comprehensive understanding of account management software (CRM), they can easily find the right expert, matching the given requirements. 

Like mentioned earlier, some challenges or risk factors may have a negative effect on the performance of SMEs. Hence, it is crucial to understand and strategize on which type of outsourcing would be beneficial for business growth.  

For example, outsourcing of accounting activities or job roles (such as payroll, tax processing, and financial report) involves internal information that can breach the security aspects. However, this can be avoided by ensuring that the company outsources to experienced teams or firms who have prior experience in managing sensitive data. Also, signing a non-disclosure contract before commencing the project can help evade risk.  

Outsourcing is undoubtedly riding high on business trends, and several small & medium enterprises have begun outsourcing a wide range of projects and roles and gaining great benefits. The prime objective of any organization considering outsourcing should be hiring trustworthy third-party service providers. Not only do the outsourcing companies have skilled experts that deliver positive outcomes and business growth, but they also ensure expeditious results based on the requirements shared by the outsourcee, that too at the best price. 

Are you looking for an outsourcing company?  

Currently, India leads in the outsourcing business. From IT outsourcing to sales & digital marketing to data entry and many business aspects, there are several services that organizations can outsource to India. The benefits are not just limited to the low cost, many companies outsource to Indiadue to its unmatched pool of talented human resources and creative professionals who contribute to business growth. 

Virtual Employee is one of the top-rated outsourcing companies in India, offering a host of services to clients across 33 countries. The VE advantage goes beyond huge cost savings. When you outsource business services to VE, you look at business expansion, profitable growth, and freedom from all overheads.

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