Reduce or Outsource Totally, there are 6 essential points that every business or individual should consider when deciding whether to outsource or downsize work. Almost anyone can do well in good times. Yet it is times of economic turmoil that separate serious contenders from suitors.
In times of recessionary trends, companies
- You must reduce daily operating costs.
- You must be able to explore and generate new or alternative sources of income.
- You must provide services at more competitive prices.
- You should cut down on all nonessential overhead.
The usual answer is for companies to handle tough times by pulling the trigger and cutting their staff entirely, reducing their business to absolutely necessary staff. While this helps the company live to fight another day, it does much more damage in the long run. This “total reduction”:
- It limits the ability of the company to bid for new projects, due to the lack of manpower.
- It seriously restricts a company’s ability to generate new revenue streams, as nonessential functions like marketing and advertising are not adequately budgeted. (I don’t understand, for the life of me, why so many companies tend to start by neglecting marketing and advertising budgets. This is a fundamental, fundamental and fundamental function. No company can hope to survive good times or bad, without advertising, except if you are Google; anyway, this is another topic for another day)
- It restricts a company’s ability to scale up operations should the need arise.
However, most companies have accepted that downsizing is a necessary evil. What we have to realize is that while a reduction is required, the work associated with staff does not need to be reduced as well. This is where outsourcing comes in. Outsourcing helps you cut costs while eliminating the pitfalls of a total downsizing. Outsourcing helps you:
- Reduce your operating costs: Let’s face it, currency conversion rates and abundant labor ensure you get more out of every dollar. A web designer with between 1 and 4 years of experience will cost us between $ 29,000 and $ 39,000 per year. However, if we outsourced this position, it would only cost us $ 7,000! $ 7,000 for the same amount of work!
- Explore and generate new or alternative sources of income: By outsourcing the management of non-core competencies, the company can narrow its focus, optimize its operations, and generate new or alternative sources of revenue.
- Reduce your product costs, allowing you to set competitive prices for your services: With outsourcing, if a web designer, who would normally cost us $ 29,000, now costs us only $ 7,000, we can now do almost 3 times the work for the same price. Which means that we can now afford to reduce the cost of our service, while still maintaining our profit margins.
- Control over timelines: I cannot stress this enough. All subcontracting contracts must, must, must have a control clause. This ensures that the company you are outsourcing to is FINANCIALLY responsible for any delays. This ensures that the company meets the agreed deadlines. The positive point for us here is that we do not have to actively manage the team and make sure that the deadlines are met. Now it’s the subcontractor’s problems. Instead, we can now search for new projects and potential clients. (haha, ideally yes. However, for early projects, it’s always best to continue to actively monitor progress to ensure deadlines are met)
- Risk mitigation: By decentralizing function management, we distribute risks. The risk is now distributed between the subcontractor and the subcontractor. This basically reduces the risks for us as an organization, which is always a good thing;)
- Take advantage of the provider’s network to access specific regional markets: One of the best long-term benefits of outsourcing. As you develop long-term relationships with your vendors, you can begin to view your vendors as outposts for your business. You can take advantage of your existing regional networks to sell your own products.
So the next time you decide to cut costs, you should consider six essential points before deciding whether to downsize or outsource.