This age-old question is still being raised by many; which is understandable because outsourcing will always be a carefully calculated risk. For those of you who may be wondering or probably still getting to know the concept of outsourcing, to simply explain what it is, outsourcing is the practice of commissioning the service of outside firms or vendors to do a certain task. It can be a short or long-term arrangement. Outsourcing is a concept familiar to entrepreneurs no matter their business size because it is convenient.
I say that outsourcing is a calculated risk because you are most likely going to work with someone whom you have never personally met. I, for one, outsource to the Philippines (More on that later) and I have not met almost all my vendors. You have to be extra careful on your search for vendors because not everyone in the pool will provide what you are looking for – especially in this time where not everyone is prepared and equipped to do the job. Proceed with caution and follow stringent hiring process to avoid setbacks.
To directly answer the question raised, yes, it does (and if you are still on the fence about going for it) and it will lower your business costs.
First, it can convert fixed costs into variable costs. What this means is, instead of hiring someone to do a task full-time and provide salary every single month the employee is with you, you can outsource only for a period when you need to (But please, let your prospective employee know how long you intend to use his services, so it will not come as a surprise to him if it’s only short-term).
Apart from the salary that you pay your in-house employee, you also reduce the cost of paying mandatory government contributions that you have to do for your in-house, full-time employees. These contributions are all on top of the regular salary you pay for every month. If you have other benefits or incentives, like health care, that’s another expense in your monthly budget. However, if you outsource, you only pay for the vendor’s fee and not worry about shouldering their mandatory government contributions, taxes, or health care, because they are the ones who will compute the right fee for them. It will be up to you to decide whether you can pay it or not.
Another way you get to lower business cost through outsourcing is through acquiring a smaller office space. Renting out an office space is no joke. The rate depends on where you are located, the size, and the services you want to come with the space. When you bring a big team on board, you will definitely have to get a bigger office space which will cost more. Hang on, it does not end there; you still have to worry about the utilities – electricity, water supply, and other things that come with maintaining an office space. If you outsource business tasks and only bring in people pertinent to your daily business operations, then you will only need a space enough to accommodate you and your small team. That’s another significant slash off your budget.
If you have an office space, it means you have to fill it with equipment and fixtures necessary to start or maintain your operations – computers, laptops, office desks, office chairs, and other work tools. You have to provide all these for your employees. If you outsource, there is absolutely no need to worry about these things as your vendors should be equipped and ready to saddle up right away.
Now, I want to bring your attention to Filipino outsourcing. I have been doing this for many years, and I could very well say that not only have I reduced my business costs, but also received globally-competent services from my outsourced Filipino employees. The Philippines is full of talents that are well and truly in a class of their own. Through Filipino outsourcing, I have reduced my business costs; but that is only a little part of why I have hired Filipinos time and time again. Their hard work, dedication, commitment, and talent are the very things that make every cent I spend worth it.
So, yes, outsourcing does lower your business costs, but I would like to pose a gentle reminder: Outsourcing is really beneficial to you and your business, but as employers, let us also make sure that it will also be favorable to our vendors. Compensate them well for the quality of work they deliver. Outsourcing is a two-way relationship; and while it may seem different from employing someone whom you can see every day, trust me, it is not. You have to extend the same kind of respect, courtesy, and professionalism towards your vendors. Just because outsourcing is seen as a way to cut down on business costs, it does not make the employers who do it or vendors who do it to earn a living any less of professionals.
If you are still undecided about outsourcing, just remember that the advantages far outweigh the cons – if you are going to smart about it. Good luck!