Outsourcing refers to the process of enlisting external companies or individuals to undertake certain tasks or functions of your business. In parallel to today’s rapid transformation — which helped organizations overcome geographical barriers — the market has swiftly grown over the past years. Estimates from Research and Markets show that it could hit $905 billion in 2027. Now, the question is: Is outsourcing good for your business?
How outsourcing is perceived
2018 survey data from Dubai Outsource City (DOC) reveals that 65 percent of respondents see outsourcing as a means to enable a focus on core functions, while 63 percent view it as a valuable cost-cutting tool.
However, in recent years, outsourcing has grown to become more than just a means to reduce expenses.
“Over the years, the world of outsourcing has grown more dynamic and encompasses a multitude of functions that add significant value to companies of all sizes, from start-ups to multinational corporations,” shared Ammar Al Malik. He is the managing director of Dubai Internet City and Dubai Outsource City.
Affirming this is the 2022 Global Outsourcing Survey by Deloitte. While the main driver for adopting outsourcing is still the need to reduce costs (57 percent), the executives surveyed cited other wide-ranging reasons. These include facilitating strategic shifts in business strategy and operating models (51 percent), pursuing new capabilities (49 percent), reallocating capital expenses to operational expenses (45 percent) and having internal leadership changes (33 percent).
Why turn to outsourcing for your business
In 2019, the United Arab Emirates (UAE) led the Middle East region in terms of cumulative outsourcing expenditure, hitting around $144 million. This figure underscores the significant role that outsourcing plays in the business landscape.
If you’re contemplating outsourcing certain aspects of your business, these are the top reasons to convince you.
Take better control of your finances
Strip a business to its core, and you will find that money is an indispensable tool needed to stay afloat. One way to streamline your spending and earn substantial savings is by outsourcing.
According to a report by consulting firm Sia Partners, 62 percent of companies reported savings ranging from 10 to 25 percent when they outsourced. Meanwhile, the remaining respondents shared that they obtained savings as high as 40 percent.
To make the most of outsourcing’s potential, you must thoroughly evaluate which functions you will delegate — and who you will tap to do those. When choosing a partner, examine pricing models, billing structures and the overall value that they offer to add to your business. You must ensure that they deliver quality work consistently.
The cost efficiency that outsourcing provides also helps businesses scale their operations more successfully. It’s like hiring additional employees without actually hiring additional employees. This allows organizations like you to grow your business without being hindered by incurring huge costs.
Tap into professionals with specialized skills and expertise
Commonly, organizations outsource Information Technology (IT), web design and development, social media marketing, customer support, accounting and recruitment. However, outsourcing goes beyond tapping third-party entities to do non-core yet essential business functions.
Reiterating data from the Deloitte report mentioned above, about half of company executives want to outsource in pursuit of new capabilities. A high figure like this doesn’t come as a surprise because outsourcing indeed provides a gateway to a diverse array of talents, no matter where they are in the globe.
For instance, a growing tech business that wants to offer cutting-edge AI solutions can collaborate with specialized outsourcing partners to access top-tier expertise in artificial intelligence development. This will enhance their capacity to innovate and help them stay competitive while adapting to changing demands in their industry.
Focus on what you do best as a business
Certainly, you’ve built your business to provide value to customers through specific products and services. But no matter what type of offerings you have or what market you’re in, you will have to perform non-core activities to maintain — and grow — your business. This is where outsourcing becomes essential.
This strategic move allows you to direct your attention to the core aspects of your operations. You can optimize your resources (including time and energy) and leverage them to design, implement, and monitor your strategic initiatives. By focusing on your primary competencies, you can steer your business in the direction where you want it to be.
The decision to outsource for your business ultimately depends on your priorities. While it makes a compelling case for cost efficiency, access to talents, and improved focus on core functions, it still comes with inherent risks. The return on investment is not always guaranteed, and there are cybersecurity issues that you must mitigate.
As you consider your next move, carefully weigh the pros and cons, taking into account your organization’s goals and budget.
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