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Advantages of Outsourcing

Outsourcing occurs when a business secures (purchases) products and/or services from a third party, as opposed to producing them in-house. There are several advantages to this.

The majority of companies, who have outsourced part of their workload, indicate that they now have more control over all aspects of their business.

One of the biggest advantages can be lower personnel costs. By outsourcing job duties to non-employees, a business does not have to pay consistent wages or offer additional employee benefits. The company may pay lower taxes because independent contractors, the people who complete the outsourced projects, pay their own withholding, social security, and other taxes. This can add up to substantial savings.

Some businesses choose to take their outsourcing one step further by choosing a vendor, located in another part of the world. Doing so typically saves them more money because they end up paying a much lower wage than would be necessary in their home country. The disadvantage is that these vendors may not understand English and communication is more difficult.

Many times, outsourcing speeds up production time. Since the third-party vendor will only be concentrating on one specific task, instead of numerous office duties, actual production time can be greatly increased.

Outsourcing gives a business the flexibility to change third-party vendors whenever necessary. This process is not as time-consuming as the normal employee hiring process, because they are not screening individuals, they are considering established companies with proven track records.

An excellent example of this is customer service. When a business outsources its customer service department, it does not have to hire and oversee thirty individual operators. Instead, it can hire one call center, which will perform all needed tasks.

Recent studies show that information technology-related tasks are outsourced more than anything else. Other common department functions that are outsourced include: human relations, training, accounting and supply management.

Whether a business chooses to outsource on a temporary basis or permanently, the advantages are well worth the decision to do so. Most businesses, which set out to outsource temporarily end up making an ongoing commitment.

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