Outsourcing Talents as a Competitive Business Advantage
What does outsourcing really do to a company?
Outsourcing Talents as a Competitive Business Advantage
Outsourcing is a practice commonly observed in business operations wherein a third party is contracted by the company in order to perform or render services or produce goods that used to be done within the company by its employees and staff. This is practiced by addressing cost-cutting plans and likewise affects the manufacturing activity and job opportunities in the company. Since the conceptualization of this practice in 1989, it has now become an integral part of business strategies in response to the changing trends in the economy. It has caused considerable concerns in some areas as it has impacted the local employment rates. However, supporters of this strategy insist that this strategy has enabled companies to allocate their resources properly and efficiently. It has also helped in the sustenance of free market economies on a global scale.
Outsourcing Should be Utilized
One of the advantages of outsourcing is the reduction of labor costs because it also involves enlisting affiliated companies or possible partners who can supply the needs of the company. The compensation structures for outsourcing often feature the accomplishment of tasks without having to spend on equipment, overhead, and technology. Most companies prefer outsourcing in order to focus on the core functions and operations of the business and smaller tasks are already taken care of by other entities. Given more focused management of the business operations the company can exert more effort on competition and expansion.
Where It Works
Some examples of tasks that are often outsourced now are internal components for computers, machines, and equipment. Law firms tap on cloud computing services to have access to digital technology without purchasing new equipment. Bookkeeping duties are outsourced as well to independent accounting firms thereby reducing the need for the company to employ an in-house accountant. A lot of human resources are outsourced now which relatively reduced the costs of health benefits, salaries, and other expenses of the company. Thus, the financial resources are now utilized for competitive advantage.
The Backlash Effect
However, outsourcing does not have all advantages, there are also disadvantages to this strategy such as the signing of contracts which adds up to the regular responsibilities of the company’s legal department. Contracting outsourcing on an international level some gain benefits on cheaper labor costs. This is also one of the main reasons why some companies also prefer outsourcing to other countries because the cost is cheaper, and they get to take advantage of the economics from this situation. In-house customer service centers are one of the best examples of jobs that are now preferred to be outsourced.
Marketing and Outsourcing
To note, the major reasons why companies outsourced are mainly to cut labor costs, and this includes salaries, benefits, overhead, technology, and equipment. Outsourcing also gives more time for the company to focus on the main purpose of the business without worrying about the less critical tasks which are done outside the organization. Despite the communication challenges, security threats, and legal issues outsourcing remain an option among companies (Jackson, N.d.).
Marketing tasks are also being outsourced nowadays. These tasks which were previously maintained through the in-house marketing department have also been included among the jobs some companies opt to delegate to outside organizations. It is admissible in any organization that marketing activities entail a lot of costs and time on the company’s operations. Aside from this hiring in-house marketing staff also add to the financial requirements for salaries and benefits. Advertising and promotional campaigns are a regular part of business operations and these are always subject to change depending on market trends. It has been noted that since these activities have been outsourced the percentage of marketing activities has been constantly increasing over the past years. Among the reasons cited for this increase is the cost-cutting of companies and the aim to improve the quality of advertisements.
To illustrate this factor, in the case of American Express it has outsourced its customer service to a company based in India. This enabled American Express to cut operational costs while it has enhanced its response time and boosting its customer service. Companies that have outsourced their marketing activities have gained access as well to database management and analysis which are provided by the partner companies that they do not have before. A company as big as Sony Style also opted to outsource their customer services, database system, and sales services for their new products because they do not have the necessary human and technology resource to respond to this need. Ericsson also did their outsourced their extranet management and sales in order to get updated customer information and have direct access to communication with their target market.
Though outsourcing is becoming a good option for business strategy there are still some marketing activities that are not entrusted yet for outsiders. An example of this is the direct or customer-focused marketing strategy which is still under the supervision of the top management team and CEO. By taking charge of this aspect the company remains in contact with the target market which helps the management in understanding the demand of the market and responding to the changing needs. This aspect is crucial in product innovation and development. Since the management still needs to know what the trend is and how they can satisfy their customers.
To be able to maximize the benefits of outsourcing, managers must not treat their outside sources as contractors or merely as suppliers. They must be considered partners which are part of the team’s vision and shared value and need not be controlled (McGovern & Quelch, 2005).
A clear understanding of marketing trends helps companies choose the best strategy and to determine how outsourcing will enhance the company’s performance and competitiveness. Today features massive information gathered through customer data and most companies intend on using this to further improve their sales. If the data from customers will be integrated into the company operations, then management will have an idea of the basic drives of the consumers and how they can serve them better.
With the growing popularity and utilization of social media global companies like Nike look forward to combining their products and services with a deeper understanding of the customers' needs. In addition to this, tablets, smartphones, social networks, and training programs have been the strongest link of the company to its target market. To remain on top of the competition market positioning is important and this is what companies intend to achieve through their efficiency in responding to customer needs and sustainability.
The trend now in marketing is a total experience for the customers and consistency in reaching out to customers through messaging across accessible means of communication. Value sharing is achieved through deeper customer relationships thus emphasis on customer service is a must. This is also one of the most common services outsourced now aside from advertising and promotional campaigns. Competitive brands invest in developing the “total experience” through a stronger market share and share of experience (Arons, Driest, & Weed, 2014).
Arons, M. d., Driest, F. v., & Weed, K. (2014, July-August). The Ultimate Marketing Machine. Harvard Business Review.
Insinga, R. C., & Werle, M. J. (2000). Linking outsourcing to business strategy. Academy of Management Perspectives.
Jackson, N. M. (n.d.). How to Build a Better Business with Outsourcing. Entrepreneur Asia Pacific.
McGovern, G., & Quelch, J. (2005). Outsourcing Marketing. Forethought Marketing, 22-26.