Why do companies choose to outsource work

Robert Cohan

Marketing

•

2 months ago

In today's fast-paced business world, staying ahead means embracing smart strategies. Outsourcing has become a game-changer, especially with the rise of AI technologies.

As an AI-focused outsourcing company, we've seen firsthand how businesses leverage this approach to innovate, reduce costs, and stay competitive. Safe to say, outsourcing is not merely a trend, it is a strategic move to propel your business forward.

The Cost of NOT Outsourcing

Maintaining in-house operations comes with some big costs:

1. Higher Labor Costs

Think salaries, benefits, recruitment, and training. According to CapitalCounselor, businesses on average can save around 70% of operational expenses by outsourcing their external workforce. For instance, outsourcing IT services can save about 40% of the usual costs, while outsourcing bookkeeping, recruitment, and other administrative tasks can result in savings of 20 to 30%.

2. Infrastructure:

This covers office space, equipment, and software. In a recent report by Exploding Topics, companies can save up to 50% on office space, 40% on equipment, 30% on software, and 35% on maintenance. These savings stem from not needing to invest in or maintain physical spaces and expensive tools. Instead, businesses can leverage more budget to core activities, drive innovation, and enhance overall efficiency, making outsourcing a smart strategic move.

3. Operational inefficiencies

Outsourcing can reduce fixed overhead costs, such as utilities, office supplies, and administrative support, transforming fixed costs into variable costs. This can save companies up to 30-50% on utilities and 25-40% on office supplies according to K&C. For example, businesses can spend up to $120 to find a misplaced document and $220 to reproduce a lost one. On average, U.S. companies spend $8 billion annually managing paper documents alone (Armstrong Archives) (Avitus Group).

4. Risk Costs

In 2023, global spending on security solutions and services is expected to reach $219 billion, driven by the ongoing threat of cyberattacks and the need to secure hybrid work environments (IDC) (Cybersecurity Dive). Downtime costs are particularly high; about 44% of firms report that hourly downtime can cost over $1 million to $5 million, excluding legal fees, fines, or penalties.

The Secret to Growing Your Business

Outsourcing is a strategic tool that can drive business expansion by providing access to global talent, accelerating time-to-market, and enabling efficient market entry.

1. Access to the Best Talent from Around the World

By tapping into the skills and knowledge of professionals worldwide, businesses can boost their abilities and drive innovation. This access to diverse skill sets allows companies to take on challenging projects and create new products and services that meet the changing needs of the market.

2. Speed up the delivery of products and services

By working with specialized providers, companies can streamline processes, launch new products faster, and stay ahead of competitors by meeting emerging trends and customer needs sooner.