A Look Into Outsourcing and Business Opportunities
Besides the lack of available of resources locally, another strong reasons why companies outsource their functions is not only to avoid costs in general but rather to avoid specific types of costs. These are what are categorized as peripheral or "non-core" business expenses that include high taxes, high energy costs, excessive government regulation/mandates, productions and labor costs.
For example, in the case of virtual assistants or digital workforce of countries like the Philippines, India, or China, they receive only a fraction of what their counterparts in the US do. Since these outsourced workers are considered contractual worker, companies that hire them do not need to allocate additional funds for setting up of office space, management salary, and the usual employee benefits.
This is particularly true in the US, among the biggest outsourcing countries, due to their high corporate taxes and government mandated benefits they have to provide their workers such as social security, and various health and retirement insurances.
Outsourcing has gained wide acceptance in the business world because it helps companies to perform well in their core business. By the start of the 21st century, businesses increasingly look for labor forces outside their own countries. More companies engaged in online technologies use outsourcing as a way to build a service delivery business that can be run from almost anywhere in the world.
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For instance, since 2006, the Philippines outsourcing has grown 46% per year. In 2013, a US-based strategic advisory for global outsourcing has ranked the Philippines 3rd (toppling India) among the top 100 countries engaged in this field. The reason for this is the increase in the demand for lower labor costs, a highly skilled and educated work force, and a high proficiency in the spoken English.
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Outsourcing of skilled workers has since grown more sophisticated and has branched into different categories such as:
- Near-shoring is a business strategy where some or all of a company’s operations are situated nearer to where its end-products are sold. Advantages of this type of outsourcing include avoiding rising costs in supply chains, minimizing cultural barriers and other time-zone constraints as results of outsourcing to offshore locations.
- Crowd-shoring is the process of getting work and outsourcing it to a crowd of workers. By engaging the participation of a large number of people for ideas and skills, the quality of content and idea generation will be superior, more heads are better than one.
- Multi-sourcing is another outsourcing approach whereby operations, usually IT, and other technology infrastructure are contracted to a series of vendors, rather than kept in-house or contracted to a select few providers. This is done in order to gain more control over costs and accountability while depending less on any one provider.
- Strategic outsourcing, on the other hand, is engaging the services of a provider to manage essential tasks instead of having them managed by in-house personnel. Example of this is the virtual assistant Philippines assets. This allows a company to maximize its assets and help it to move closer towards its goals. Strategy outsourcing also reduces the cost of operations and enables the allocation of available resources to the other necessary functions in the organization.
Outsourcing can offer greater budget flexibility and control. Outsourcing lets organizations pay for only the services they need, when they need them. It also reduces the need to hire and train specialized staff, brings in fresh engineering expertise, and reduces capital and operating expenses.
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