Outsourcing is the transfer of a certain business activity to an external source outside the organization. In recent decades, this has become a significant trend, joined by businesses of all sectors and sizes, wishing to avoid the direct employment (payroll) of experts in certain fields and instead opting for services from specialized service providers. There are numerous advantages to this approach, alongside important information to know before embarking on this path.
What is Outsourcing?
Historically, many companies, both locally and globally, have used B2B (Business to Business) services that provide a variety of responses, comprising a range of services and products relevant to their industry.
However, a more innovative service model that has evolved from the B2B worlds today refers to the services of experts in unique fields, which a company can hire as needed to perform specific tasks, thereby relieving itself of the resources and responsibilities involved.
For instance, a large law firm can outsource its entire office management team. This team handles calls, takes messages, coordinates meetings and payments, all without employing any actual administrative manager – resulting in significant organizational savings on everything involved (salary, social conditions, office and computing equipment, office expansion, etc.).
In an even more popular example, many businesses today utilize the external services of digital and software experts. Many brands transfer their marketing work to external agencies, and new initiatives find the best software house to write custom code for them. Most businesses are also equipped with an accountant who is not an employee of the organization, and the practical nature of outsourcing extends into complex worlds such as finance, computing, and beyond.
According to a survey published in “Geektime” magazine in collaboration with SQLINK Group, the outsourcing market in the American high-tech industry closed the year 2023 with a 70% jump. The survey also found that 75% of employers notice a sharp increase in productivity thanks to the outsourcing team, which necessarily improves the organization’s efficiency and growth.
How Does Outsourcing Work?
Outsourcing is not suitable for every project or goal, so the main derivative of using the service is cost versus benefit: Does the organization need to undergo an expensive and prolonged recruitment process to produce or operate something? Does it currently have the infrastructure and resources to do so successfully? What about the training process, budget, supervision and control procedures, and, of course, the outcomes at the end of the road?
All these establish the unique way in which outsourcing operates: transferring an activity in a certain field that the business is not expert in and wants to save resources for its development, to talented talents already equipped with the appropriate skills and ready to start tomorrow.
Thus, when a business is interested in outsourcing services, it first needs to identify the desired function, determine its purpose and objectives, and seek the suitable service provider. A good outsourcing company will complete the task on the best side and will also ensure a continuous control mechanism on the performances and present them in full transparency to the organization’s managers along the way.
Examples of Outsourcing
Examples of Outsourcing
Businesses across various sectors today rely on software and code experts to build their product lines and services on the suitable computing/digital platform.
Organizations with local computing infrastructures prefer to save on the direct employment of IT experts and therefore turn to an outsourcing company that provides ongoing service and support in this area.
The payroll accountant is not always found within the organization itself but serves as an external factor managing salaries, deductions, and tax work, thus yielding full value to the organization with significant cost savings.
Reasons for Using Outsourcing
The business is not familiar with various technical worlds (finance, technology, computing, etc.) and does not wish to expand its permanent staff for this purpose. Therefore, by employing experts through outsourcing, the organization reduces the risks involved in its development process, remains stable in its routine activities, and receives ongoing support and backup.
Outsourcing allows a company to grow and develop, create applications, new methods, and maneuvers properly among routine tasks. Employing experts not only saves on employee and resource costs but also in dealings with additional secondary suppliers. For example, an outsourced software development team, familiar with the market, can approach relevant hardware companies and get the best price from them.
Outsourcing complex tasks allows a business to better control profit and loss issues. The organization gains maximum managerial control when the outsourcing company integrates into its regular work processes, thus creating peace of mind and confidence in the routine activities the organization knows how to perform well.
In Which Fields is Outsourcing Used?
The supreme advantage of outsourcing is the ability to leverage a wide pool of talents. This is reflected in a variety of fields that require special skills such as technology, finance, advertising, and more. This skill is, of course, the result of extensive education, training, and practical experience, so not everyone is capable of it, and not every business can or even wants to use it in direct employment.
- High-tech Industry – Many high-tech companies outsource to countries where operational costs are lower or alternatively turn to local talents that provide a point need at an optimal rate.
- Financial Sector – Financial organizations are required to innovate and upgrade regularly, necessitating their turn to experts in technological, technical, and computing worlds.
- Advertising Industry – The advertising company employs talents who know how to refine messages but are not necessarily familiar with ancillary services like analysis, research, and networks.
- Engineering Field – In engineering professions, collaborations with experts from many complementary fields from the worlds of programming, IT, app development, and more are possible.
- Government and Public Organizations – Even large bodies tend to embark on complex projects with outsourcing companies, especially in various technological fields.
Different Types of Outsourcing
In recent years, the field of outsourcing has advanced and optimized the way of interaction, expanded the range of existing skills, and increased the number of talents in the market. This led to two main subtypes in outsourcing:
- Global Outsourcing (Co-sourcing) – Ongoing and deep interaction with a particular supplier or expert for a long period, such as outsourced payroll accounting, IT management, procurement, digital marketing, and more.
- Selective Outsourcing (Selective or Modular Outsourcing) – Point interaction to carry out a specific project or task, usually in dynamic situations like software or application development.
Advantages and Disadvantages of Outsourcing
Advantages of Outsourcing:
- Organizational, business, and economic efficiency
- Significant financial savings
- The “expertise” effect – handling a task by a knowledgeable and skilled party
- Increased productivity within the business itself
- Focusing on the core areas of the business and its routine management
- Efficient control in a profit and loss environment
- Faster achievement of goals and results
Disadvantages of Outsourcing:
- Partial control over working hours and actual project progress
- Increased dependence on outsourcing that requires constant control and balance by the organization’s managers
- Restrictive regulations (for example, against regions or countries, data protection and privacy laws, etc.)
- Impact on employee skill development – limiting employees’ adaptability to changing situations and finding efficiency solutions
Outsourcing represents a fantastic boon for the business sector in Israel, across all sizes and fields. However, as long as the purpose of the outsourcing market is to reduce risks and optimize organizational activities and outcomes, it’s important to choose a company with a positive reputation that holds the best skills, especially in critical and sensitive areas like software, computing, and financial management.
At Porat, we turn every complex problem into a quality outcome: we assemble the best team of experts for the task, tailor the solution optimally, and operate with you in full transparency until maximum success. We are always committed to your excellence and invite you to talk, be impressed, and embark on a journey with us.