Type Of Business Outsourcing Models And Their Pros And Cons

by | Published on Jan 5, 2022 | Outsourcing Services

Why Outsourcing has Become an Integral Part of Businesses?

Outsourcing became an integral part of businesses since the 1990s. It can be defined as a business strategy that hires a third party (domestic, near shore or off shore) to carry out certain tasks or services of the company. Businesses require outsourcing irrespective of their size to cut labor costs and to prioritize the core functions of the business. Outsourcing services are very important for building your business and to expand the client base. It helps a business to grow and evolve by effectively outsourcing responsibilities to highly talented labor.

The outsourcing types available in the market are based on the location of the outsourcing companies. It can be classified into three types:

  • Onshore or domestic outsourcing: The Company that is hired is a resident of your country.
  • Nearshore Outsourcing: The Company you are hiring is located in a near abroad location, or in your neighboring country.
  • Offshore Outsourcing: You are choosing a company located in more remote parts of the world for getting your work done.

Based on the nature of task and expertise needed, businesses need to wisely choose from the above three modes of outsourcing services. Onshore outsourcing has the advantage of working with a contractor located in your own country without time-zone restrictions. There will be no language barrier which can ease communication. Uniformity in legal practices is an added advantage.

If you hire a near shore outsourcing company, there is an opportunity to work with a foreign development team by engaging with them in normal business hours. A short flight time enables seamless communication with the outsourcing company.

Companies choose offshore outsourcing eyeing the low-cost talent pool. The availability of required expertise round the clock ensures better level of service.

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Outsourcing to Scale Up Your Business

Technological advancement has paved the way for businesses to rely on business process outsourcing companies for innovative services in a cost-effective manner. With the most recent technologies in place, businesses can rely on Outsourcing services which helps to allocate their resources for product leadership and customer relations. By focusing on their core competencies, businesses get to increase the ROI and gain a competitive advantage.

outsourcing services

    1. Professional Outsourcing: Companies can opt to outsource processes such as accounting, digital marketing, legal, CAD and administration to professionals who are expert in these fields. The outsourcing company requires years of experience and expertise to extend these services. By paying for the wide range of services, the burden of in-house maintenance of experts with the mentioned skill sets can be avoided. For example, legal service is an essential service which businesses need once it starts functioning. Legal processing outsourcing uses professional lawyers for legal document scanning and document reviewing in a cost-effective manner.


    1. IT Outsourcing: In this, external service providers are entrusted with IT- enabled business processes, app development and infrastructure solutions. These are utility services and also IT outsourcing is relied upon for storing huge data.


    1. Business Process Outsourcing: Businesses approach a business process outsourcing company to hire outsourcing activities like accounting, payroll processing, IT services, data entry services, customer support and technical support. It is very important to manage the data entry tasks of a company for increasing in-house efficiency. Data entry services play a major role in categorizing and digitization of various forms of data which is stored electronically. The data entry services include:
      • Data Formatting: – It is the process of formatting specific set of data.
      • Data Conversion: – It converts data from one form to another. The conversion can be from hard copy to digital form. The digital data is converted from one format to another format. For example, a file in pdf format can be converted to xml format. Data conversion companies make the cumbersome task of converting huge amount of data in multiple formats to the required format with accuracy. Businesses depend on data conversion outsourcing to avoid discrepancy in data and data redundancy.
      • Data Cleansing:- Ensuring the credibility of a Company’s data is very important. Data cleansing companies are relied upon to identify corrupt and irrelevant data. These companies rectify errors in data like duplicate values and resolve empty values. Data cleansing services are essential for integrity of the Company and its competitive edge.
    2. Process Specific Outsourcing: It is the outsourcing of certain processes that are related to specific tasks or related to internal procedures of the company. Digital Marketing is required for brand recognition and this task can be delegated to outsourcing companies.


    1. Project Outsourcing: Hiring a truly talented Project Manager can change the growth trajectory of the business. If your company is dealing with numerous difficult projects, project outsourcing is the best business strategy to handle this.


    1. Manufacturing Outsourcing: To concentrate on core functions of the business and to cut labor costs, companies depend on external service providers to manufacture their products in entirety or to assemble it.


Pros and Cons of Outsourcing

How Outsourcing Is Beneficial for Your Company

  • Decision Making: When a part of the functions of the business is delegated to external service providers, the necessity to hire more in-house staff can be avoided. This in turn improves the decision making process of the company by focusing on the tasks done by existing staff.
      • Cost-effective method to acquire services: Quality services with low cost are what businesses looking for the growth of their company. When services are outsourced, businesses have access to low cost talent pool.


      • Increases productivity and efficiency: By outsourcing complex services, businesses can focus on current priorities without sparing time for admin responsibilities. This can increase client base and reinvest the money back to their business.


      • Reduces the burden of risk: By partnering with competent outsourcing companies, the associated risks can be shared. The in-house staff lacking the expertise is vulnerable to market shocks.


      • Better management of in-house staff: When workload of the in-house staff is reduced, they can be made productive. The in-house staff can be developed by assigning them new tasks.


      • 24×7 functioning of the business: If the services are outsourced, you can run the business round the clock.


      • Ensures financial flexibility: You can scale down the number of independent tasks when there is uncertainty in market demand.


The Drawbacks of Outsourcing Services

Outsourcing Services can make or break your Company. Businesses need to be very cautious in choosing the right outsourcing provider.

    • Mismanagement: The outsourcing companies are not working on-site. So, there can be lack of control over the outsourced services. Businesses can’t monitor the process at every stage of the task performed.


    • Security Breach: It is essential to protect the confidential data of the company. If there is data breach of your customers, it hampers the privacy and this affects the integrity of the company.


    • Limitations on Quality: Constant monitoring is impossible when outsourcing business processes. There can be issues with attaining the desired quality expected by the company.


It is obvious that there are potential drawbacks when companies outsource business processes. However, advantages of outsourcing outweigh disadvantages. The limitations can be avoided if businesses choose an outsourcing services company with years of experience in this field. It is crucial to make the service provider aware of the goals and nature of your business. The time zone must be utilized in such a way that it is advantageous to you.

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