One of the most important reasons why companies choose to outsource is to reduce costs. Selecting the right external company provides access to its best resources. These primarily include skilled employees and the latest technology. Utilizing these external resources enables you to avoid large expenses and set the surplus aside to put into new investments, for example. In what other ways does outsourcing reduce costs in an organization? Read on to find out!

Outsourcing and cost reduction – table of contents:

  1. No need for additional employment
  2. Less expenditure on equipment and office space
  3. Other expenses
  4. Summary

No need for additional employment

Let’s assume that we plan to create a section in our company that deals with data analysis for online marketing. In order to start a new department, we need to recruit and hire appropriate employees. From the very beginning, this process involves costs in the form of involvement of HR personnel in the recruitment process. After selecting the best candidates, we still need to conduct in-house training to make them more familiar with their responsibilities.

According to The 2018 Training Industry Report, on average, 46.7 hours are spent on training per employee in one year. The employer has to spend an average of $1075 per person for this. The candidates we hire must, of course, be properly compensated, as well as paid their due contributions. However, even after hiring and training them, we are not sure whether they will continue to work for us and whether we will not have to run the whole process from the beginning, which involves further expenses.

By using outsourcing, you do not have to create a new department and thus employ additional people. Just pay an external company only for a selected package of services and it will also outsource the data process analysis associated with the service. In this way, you avoid the costs involved in the entire HR process.


Less expenditure on equipment and office space

Creating your own internal team is not only accompanied by salary costs, but also entails other expenses. These are, for example, costs associated with having additional office (production) space. A larger number of employed people need an appropriate space to work. Therefore, you have to rent, buy or add additional office space, which requires an investment of additional money and time.

Once this is done, we also need to provide our team with the right equipment to work with. In the case of data analysts, this will mainly consist of IT equipment such as monitors, computers or laptops, headphones and microphones. You should also add expenses in the form of buying licenses for the necessary software. Additional hardware also increases energy consumption.

Outsourcing reduces the costs mentioned above. By using the services of external companies, you don’t have to worry about renting (buying or adding) additional office space or incurring expenses on appropriate work tools. Outsourcing companies already have the necessary facilities and equipment needed to perform services for us.

How can outsourcing reduce costs

Other expenses

Relying only on your own in-house team may also involve less obvious expenditure. Frequently, companies need to provide 24/7 support for their clients. These are usually organizations related to running and maintaining server rooms, and also telecommunication companies. They are therefore forced to pay employees 24 hours a day – working at night or on weekends means additional costs for employers.

In order to avoid them, it is possible to use services of external companies operating in other regions of the world during night hours or weekends. This ensures that we can take care of our clients all around the clock without any additional costs.

Using the services of outsourcing companies also enable you to access employees from regions where the cost of labor is much lower than within the company’s headquarters. Employing companies that offer the same level of service allows us to save additional money.

Outsourcing and cost reduction – summary

Outsourcing facilitates cost reduction in all enterprises. Choosing the right company to provide such services can not only maintain current productivity but also increase it. This happens with much less resources than in the case of relying solely on internal teams.

Read also: 4 reasons why outsourcing is a growing trend

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Author: Andy Nichols

A problem solver with 5 different degrees and endless reserves of motivation. This makes him a perfect Business Owner & Manager. When searching for employees and partners, openness and curiosity of the world are qualities he values the most.