The Benefits of Outsourcing: Why It’s a Smart Business Move

Business process outsourcing is one of the most effective ways to reduce operational costs. However, small business owners may hesitate to use it because it means relinquishing control over some internal systems and processes. This article examines the benefits and risks of outsourcing.

Some key takeaways:

• Companies interested in more effective cash flow management focus on cost savings outsourcing that can reduce cash outflows and increase revenue.

• Outsourcing to cheaper labor markets in foreign countries may seem like an obvious choice, but domestic outsourcing can also cut costs for your company.

• Building specialized capabilities in-house requires substantial investment; outsourcing gives you access to teams that have already mastered their craft.

What Are the Key Benefits of Outsourcing?

Let’s look at some numbers before we begin. According to a recent business survey conducted by CSV Now, the global outsourcing market is valued at $92.5 billion, companies using outsourcing services have reported an average cost savings of 15% to 30%, and millions of jobs have been created globally through outsourcing services.¹

Outsourcing advantages extend far beyond the obvious financial gains. Progressive business owners who understand this embrace the global talent access available to them. That includes back-office and IT professionals in other nations and domestic providers closer to home. The real value lies in the strategic transformation an outsourced workforce can provide.

Cost Savings

Companies interested in more effective cash flow management focus on cost savings outsourcing that can reduce cash outflows and increase revenue. This is a simple concept. You spend less, and your profit margin will be higher. Ideally, you don’t want to sacrifice quality to achieve that. That’s a common argument against outsourcing to cheaper labor markets.

What’s often overlooked is that domestic outsourcing can also save you money. Outsourced workers are independent contractors and service providers, not employees. That means you eliminate the need for office space, equipment, benefits packages, and ongoing training costs. It doesn’t matter whether the provider is in India or Indiana.

Outsourcing efficiency is another variable in the cost equation. Paying a provider fewer dollars per hour won’t save you any money if they take twice as long to complete the work. On the other hand, you will cut costs if you outsource to an engineer in Eastern Europe or Southeast Asia who can do a better and faster job than their American counterparts.

Access to Expertise

Business owners in developed countries like the United States and Great Britain tend to view other nations as labor pools with a lower skill level than their domestic counterparts. That is simply not true. The global talent pool includes thousands of incredibly smart engineers, IT specialists, web designers, digital marketers, accounting professionals, and more.

Why would you not tap into that level of global expertise? While building specialized capabilities in-house requires substantial investment, outsourcing gives you immediate access to teams that have already mastered their craft. Putting some of your systems and processes in their hands could make your firm more efficient, and it will certainly cut down on labor costs.

This approach is particularly valuable for emerging technologies. Rather than spending months building an artificial intelligence team, you can partner with specialists who already know what they're doing. Ironically, many companies are exploring this option using AI-powered search tools. Harnessing that technology will be critical for success over the next decade.

Scalability and Flexibility

Outsourced workforces are like independent building modules. They can be added or removed without affecting the structure they’re attached to. For instance, you could outsource your customer service to avoid having to build an internal call center. If that doesn’t work out, you can remove the outsourced service and then build or simply outsource to another company.

Let’s view this from a scalability perspective. That outsourced customer service center agrees to handle a specific volume of calls. If the volume increases, the provider can scale with you by adding new reps. When the volume slows, they can cut back. Your cost may go up or down, but you don’t need to hire and train new workers to meet the fluctuating demand.

This flexibility becomes crucial during economic uncertainty. Companies that embraced outsourcing weathered recent market volatility better than those with rigid internal structures. This provides a valuable lesson for small business owners. Outsourced providers are easier to remove than permanent employees when times get tough.

How Does Outsourcing Improve Efficiency?

Outsourcing efficiency is the internal focus derived from offloading services that don’t count as core activities. This allows your team to focus on what drives business value. For example, outsourcing IT services means your marketing team can concentrate on strategy without getting caught up in troubleshooting their technology. Imagine how much happier they would be.

Executives also benefit from outsourcing efficiency. Imagine what would happen if you outsourced your entire accounting department. There’d be no more payroll reports, bickering over expense categorization, or worry about whether the bills got paid on time. Without those concerns, you could spend more time on growth, scale, and increasing monthly revenue.

What Are the Most Commonly Outsourced Services?

Business process outsourcing encompasses a wide range of different services. It’s expanded beyond back-office functions to include activities like digital marketing, accounting, and even legal assistance. The most common outsourcing is in the following categories:

IT and Software Development

Information technology (IT) is by far the largest segment of outsourced work. This includes everything from help desk support to complicated software development. Cybersecurity and mobile app development are high on this list because they’re the most in-demand in the United States and the European Union. Cloud migration also ranks fairly high.

Customer Support

Outsourcing your customer service, particularly to another country in an opposite time zone, is a great way to ensure 24/7 support for your customers. Some companies maintain a traditional customer support service stateside during business hours and switch over to the outsourced entity when the business closes for the day.

Human Resources

This is a broad category that includes payroll processing, benefits administration, compliance monitoring, and recruitment. This is particularly valuable for small and medium businesses that need professional HR capabilities without the overhead of a full department. Employees benefit from this because smaller companies might not have HR at all without it.

What Are the Risks of Outsourcing?

The primary risks of outsourcing are managing quality and ensuring data security. Distance and cultural differences can create communication problems. You can overcome this by working with companies that have a good reputation in your industry and insisting on ISO 27001 or SOC 2 Type II certification. You should also implement data encryption, access controls, and regular security assessments to maintain protection standards.

Streamline Global Payments with Wise Business

When outsourcing to international providers, payment complexity becomes a significant operational challenge. Traditional bank transfers impose high fees, unfavorable exchange rates, and lengthy processing times that can strain vendor relationships. Wise Business can eliminate these friction points with features designed for modern outsourcing arrangements.

Find out more about Wise Business

These capabilities transform international vendor payments from an administrative burden into a competitive advantage. Your outsourcing partners receive payments quickly and cost-effectively, strengthening relationships and ensuring smooth operations.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

	Editor & Business Expert:
	Panna is an expert in US business finance, covering topics from invoicing to international expansion. She creates guides and reviews to help businesses save time and make informed decisions. You can read more useful business articles on her author profile.

	Author:
	Kevin D. Flynn is a retired financial professional, business coach, and financial writer. He lives in Leominster, Massachusetts with his wife Evelyn, two cats, and ten wonderful grandchildren. When he’s not working, you’ll find him at the golf course or on his back porch reading classic sci-fi novels.

Sources:

¹ Outsourcing Trends and Statistics for 2024