Outsourcing is whereby a company hires another to handle tasks, operations, or provide services that were previously performed by the company’s employees. Most subcontracted services are customer care services, cleaning services, and call service functions.
The growth of Artificial Intelligence(AI) technology has brought automation in many industries, which has influenced offshoring. If a machine can perform most duties, a company is most likely to get rid of most employees and seek external workforce from a company that can provide such services. AI technologies have and will still impact industries positively and negatively too.
How did outsourcing Begin?
In the beginning, outsourcing was restricted to low-risk tasks like payroll processing and data entry. Today, the service has brought about significant changes in business operations. If you are about to initiate the practice, you may be wondering if it will stand the test of time. And, the answer is, yes, you can go ahead. It will be challenging, but you have to find ways to survive future crises.
The revolution in business that came about with subcontracting brought cost benefits to organizations, and more organizations joined the process. Some organizations interested in substantial cost benefits also sought high-end IT service functions, AI technology in healthcare, and research services joined the practice.
Today, the hype with subcontracting is not only to cut costs on labor, but it is a crucial business strategy for your businesses. The organizations that believe in 100% devotion to essential business operations then get the rest of the services from a service vendor.
Countries like India, The Philippines, China, and Mexico are significant beneficiaries of externalization business opportunities. The one leading is India, which is a well-known source for IT geeks, and they have made a name for themselves. And, perhaps they are the leading beneficiary of outsourcing. Anyone looking for external labor services in IT and ITES will most likely hire someone from India: They are multi-talented, affordable, timeless, and reliable.
Effects of Outsourcing
Outsourcing can be traditional or next generation. Traditional outsourcing is when you delegate your work along with authority to people outside the boundaries of your company, and the increased use of AI mostly influences the latter. Below are some of the effects of Outsourcing:
- Increase Savings: Since most of the work is outsourced to the developing nations where the cost of living is pretty lower compared to the developed countries, the companies hire cheap labor. This helps them save a lot of their money. Also, their work is done more efficiently.
- Increase Productivity: Since the work is outsourced to highly talented, skilled, and experienced workers, the productivity of the company reaches far higher levels in quite a shorter duration, which would be very difficult if the company has undertaken those tasks internally.
- Focus on core activities: When you delegate routine activities to others, you get the opportunity to focus on the core activities of your company. When you focus only on the complex tasks of your organization, yours and your company’s productivity increase, and you yield more significant profits.
- Access to better Technology: It is possible that you do not own all the technological machinery, especially if you are a small or medium-sized organization. Outsourcing helps you acquire the benefits of the latest technology. This is because the outsource vendors stay updated and on track for all the trending technologies in the market.
- Flexible Staffing: In case you deal in a seasonal or cyclical business where your company demands more staff in some part of the year and lesser staff at other times, outsourcing helps you get the work done by temporary staff. You do not need to keep the burden of full-time employees when you least require them. This enables you to save a lot of your money.
For the companies that are yet to indulge in outsourcing, they are missing out on essential business growth opportunities.
Debate: To Outsource or Not
Most companies are stuck in a discussion of the pros and cons of subcontracting. The biggest dilemma is whether the service is sustainable. Those opposing outsourcing support their stand actively with reasons like loss of quality control, lack of management on a project, and lower or no innovation prospects.
Other critics believe that salary raises in outsourcing projects may turn out to be less profitable in the future.
Besides negative criticism, outsourcing is still growing. As earlier stated, the practice has been embraced by all organizations.
It is subcontracting as a tool that gains a company’s competitive advantage in business because it grows on platforms like cloud, social media, and mobile. Outsourcing conveniently adapts to any change in the environment rapidly.
The future of outsourcing
Cost-saving is the best outcome for companies that outsource as trends indicate. In any case, cost efficiency is the leading factor that any organization will first consider when selecting an external service provider. However, concentrate more on overall values to the organization besides cost reduction.
Technology is ever-evolving, and the subcontracting domain, too, will follow suit with new services such as the creation of new markets and unique service areas for both customers and service providers. Outsourcing deals in the future will be different, with an altered outcome. Below are various possible results.
- It might not be about cost-saving but focus more on value-added deliveries as well as strategic services.
- Organizations are increasingly embracing RPA as an alternative to externalization transactional work.
- Advertisements are misleading as they show how easy it is to build robots, but more is needed than to automate a process
- Before outsourcing, make sure the process is efficient and beneficial to the company. It makes no sense to outsource an inefficient process. It is wise to make it better or eliminate it.
- What is available today on AI is weak AI meaning they only perform specific tasks. And enterprises should know that they may not be able to automate and eliminate most jobs. Bots only automate or carry out part of the mission but not a full post. Humans will still be required.
- If an organization decides to build bots, remember that it is not a one-time thing. A business needs change and evolves, and bots need to be upgraded, modified, overhauled, or even replaced. First, before outsourcing, assess the impact of existing bots and the expectations of an entire use. If they are suitable for business, then go ahead and outsource.
- RPA is primarily a cost-saving play, and some potential effectiveness will be achieved. However, to make it likely, full organizations should pursue more complex ML efforts.
Future Outsourcing is Automation
Externalization in the future will be general. Many organizations will not hire but give a tender with someone or an organization to do the job. Automation is gaining popularity, and most functions and processes that were handled by employees will be managed by Business Process Outsourcing(BPO), which is mostly AI. Technology has changed outsourcing to a great extent.
These changes will bring massive setbacks to human resources concerning employment. However, there will be fewer errors but high productivity with quality. Errors will be highly reduced, although the question of customer satisfaction should also be put into consideration. AI systems are automated. They might not have the intelligence to note some minute errors that a human force can correct.
What will the customer experience be once an organization dedicates an entire production chain to automation? Many companies need to consider customers before employing AI. The need for human effort will still be required. Today, people dislike the automated voice machines. It is a good idea for a company to have a flexible human resource that works during the day, and the Artificial Intelligence system can take over at night when fewer clients might need the service.
On the other hand, future Outsourcing for Business to Business(B2B) is now considering the use of automation and AI or even outsource to companies that provide the services. Big companies outsource some functions to institutions with exclusive human resources.
Outsourcing Trends for the Future
- Subcontracting relationships have come about and are people driven than price-driven. The process is now standard and has leveled the playground for service providers.
- Cost pressures likely make way for external contracts with flexible Service Level Agreements(SLAs) and delivery.
- Businesses will adopt out posting to reduce inefficiencies and increase their market time.
- Companies that use raw material may seek external services to cut on transportation and operation costs.
- In the next decade, expect more high-end business functions to subcontract. On the other hand, low-end services will stabilize.
- Latin America and Europe will likely be the most significant competitors of India-the favored outsourcing destination.
Outsourcing has had strong and negative sides in real-time. Most companies are still unwilling to outsource or talk about their positions openly. However, in the upcoming years, it will be the only way for companies to make progress. When companies are open to discuss their service provider, it may also give strength to external service providers to come out of the shadows.
When both partners (outsource seekers and providers) work from open level ground, the partnership will become reliable yet competitive. When externalizing becomes a free business practice, clients will outsource from vendors with the best customer-centered as well as progression to new technology.
Externalization will survive in the future because many organizations are adopting the services. Companies will seek specialized access to skills that save them on time, money, and effort. And, they can channel the funds to other business ventures.