The Debate Is Over: Outsourcing Works

When you dive into the operations of many of the world’s most successful companies, you discover something strange. Many of them don’t seem to be there. 

You peek under the cover, expecting to see thousands of people frantically scurrying around, trying to make the magic happen, but wind up with a big, fat nothing-burger. Everything is ghostly quiet on the inside of these organizations. 

The reason for this is the feverish development of outsourcing business models over the last forty years. It’s the silent revolution nobody paid any attention to but that is transforming the world economy and is perhaps responsible for more economic growth than anything else. 

Now the practice is so entrenched, that the debate seems to be over. Outsourcing is simply better than trying to do everything in-house. 

Here are some of the arguments in favor of getting external companies to take care of aspects of firms’ operations: 

Access To Global Talent

Collecting the most talented marketers, researchers, accountants, and ancillary service providers and cramming them all into a single firm is impossible. Apple can’t even do it. 

But outsourcing makes this kind of rapacious and salacious hunger for productive individuals less critical. Now, companies can simply buy their services from third-party firms. 

This approach was impossible in the past. If one Fortune 500 company had a genius marketer, it meant that a rival company couldn’t use them. Now both can benefit from their expertise and often for less money than paying them a salary outright. 

The same is true for manufacturing operations. Product-based companies in the Industrial Revolution had to build products themselves on their properties. Now, thousands of highly-tooled manufacturers across the globe in places like Vietnam and Mexico are doing it for them. The intellectual capital is still concentrated in these firms, but the production know-how is shipped abroad. 

Improved Flexibility

Outsourcing also gives companies the flexibility they crave while preventing them from getting locked into various service agreements that don’t help them. Multiple companies are sprouting up, doing their bit to make the business journey a little more straightforward. 

Self storage company Pink Storage is seeing the demand for these kinds of services first-hand. “We’ve had a significant influx of business customers wanting flexible storage for their stock,” the company says. “The idea of signing a multi-year contract for a warehouse is ridiculous for many of these individuals. But storage gives their operations the flexibility they need to thrive, without eating into their funding too much.”

It’s this flexibility and scalability that outsourcing firms use in their marketing. Companies want to prove that they have the acumen and resources to enable brands to operate in line with consumer demand instead of what practicality allows. 

“It makes a tremendous difference when business leaders can sign up and start using storage on the same day,” Pink Storage says. “The process is easy and companies don’t need to sign onerous contracts. It’s just an on-demand service like so many other business support options now provided by companies.”

Economies Of Scale

Outsourcing is also gaining an edge because of economies of scale, or the ability to provide large volumes of services at lower cost than doing it in-house. 

You can see the effects of economies of scale across the outsourcing industry. Buying 100 blogs from a white-label content writing agency is vastly cheaper than trying to cajole resident employees to do it in-house. Prices can be 50 percent less or more. 

Economies of scale also show up in things like website design and online security. Developers and managed service providers can scale their operations with the push of a button, doing most of their work through the cloud. Companies can remain with the same agencies, even as they grow from startups to billion-dollar companies.

Regulatory Compliance

Another reason outsourcing is dominating is because of regulatory compliance. The sheer number of rules businesses have to follow is forcing many to go to firms that provide audit-proof packages from the get-go. That confidence is worth a fortune in itself and causes many businesses to abandon the idea that they need to do everything themselves in-house. 

Outsourcing is particularly helpful in this regard when companies expand into new regions. Getting an HR agency to take care of workers’ rights and payroll can avoid any unfortunate breaking of the law by management. Employees get their dues while executives avoid appearances in front of tribunals.

Faster-To-Market

Outsourcing companies may also be useful in getting a business model to market faster. Entrepreneurs don’t need to develop all the systems they need in-house. Instead, they can rely on existing infrastructures to push out their products. 

Speed to market is a big deal for many startups. Funding can dry up rapidly without any product or revenue to show for VC’s investments. But specialized access to things like fulfillment and prototyping can speed up this process significantly and help firms prove their financial viability in years one and two. 

Strategic Consulting

Outsourcing companies are also helping brands become less reliant on executive talent. Firms with just one or two good leaders are using them to behave more intelligently by getting third-party companies involved in data-driven decision-making. 

Essentially, these services are like having an experienced board inside the firm. Consultancies use their insights across industries and verticals to instruct strategic decision-making at the highest levels. Entrepreneurs worried about doing the wrong thing can benefit from them substantially. 

The other focus of these services is to move the firm in directions that foster long-term growth. Startups can often concentrate so much on the minutiae of daily running a business that they can’t see the grand vision. That’s the perspective that these external services bring. 

Risk Mitigation

Finally, we are seeing the outsourcing of risk mitigation to various external firms. The idea here is to externalize the risk individual firms face to enhance their chances of survival in the face of loss. 

Risk mitigation can take various forms, aside from insurance. The most common is outsourcing legal risks to another firm, but there are other options to explore.