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Outsourcing is the first step after invention. Only outsourcing, or to reach beyond boundaries of geography and identity, can multiply—both territorially and intellectually—the benefits of invention and ideas. In a world where thoughts and actions can be executed with the click of a button—outsourcing or to outsource— has become as necessary as power and water in economic activity.

The reasons for outsourcing are many—which ones, and to what extent they are cited and form the basis for outsourcing, depend on the nature of work being outsourced. The following list provides the most proven reasons for which companies in the U.S., Europe, Japan, and South East Asia outsource manufacturing and delivery of products and services to outsourcing destinations such as India, China, Pakistan, the Philippines, South Africa, Brazil, and Israel. 

Outsource to avail of cost advantages

The major benefit of outsourcing is in reducing cost. Labour forms a substantial part of input costs. Availability of a large pool of educated talent pool in outsourcing destinations makes cost of hiring much lower than that in the West. Companies can save between 20–60 per cent in employee costs by outsourcing.

Outsourcing turns fixed costs into variable

All entrepreneurs know the meaning and role of fixed and variable costs. Outsourcing enables companies to hire and retain employees and infrastructure on an as-per-need basis—thereby turning the usual fixed costs into variable costs. This way, a company is not tied down by fixed costs, and the savings on variable costs accrue as profit.

Cross leverage of skills

Outsourcing vendors can cross leverage their skills and expertise across industry and technologies to achieve greater efficiency and quality levels in the outsourced process. In this context, outsourcing can be “value- added”. For instance, there are many outsourcing vendors that provide legal, software, medical transcription, and accounting outsourcing from a single window.

Ease of employee responsibility management

By outsourcing, a company need not be burdened with administrative and HR-related issues regarding present and future employees working in an outsourcing unit of a company. The responsibility and accountability for employee management shift to the outsourcing vendor after a company signs up with an outsourcing vendor.

Compensates for the lack of internal expertise

Many companies, small and large, do not have expertise in all business areas. Gaining expertise can take up time and resources. Lost time and resources can decrease competitive advantage. In such a scenario outsourcing makes eminent sense, as the time-test experience of an outsourcing vendor comes handy.

 Gain market access of supplier’s network 

Gain market access and business opportunities through the supplier’s network On outsourcing, a company, be it in North America, Europe or Asia, has to work closely with people and culture of another country. Outsourcing provides the outsourcer market access in the form of market information and customer profile. Business opportunities can also arise via business contacts of an outsourcing vendor. As seen from the above, outsourcing has multifaceted benefits, which are long term in nature. Apart from the advantages, the reason for the popularity of outsourcing is primal in nature. Demand for outsourcing has got entrenched due to core shifts in the way capital and technology are being deployed in the West.

Improved customer satisfaction

Outsourcing ensures a more streamlined business due to its cost, timesaving, and resource optimisation advantages. These result in improved customer satisfaction levels—as customers find the company to be reasonably priced, and quicker in reacting to their needs. Outsourcing results in customer loyalty.

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