What is best for my organization: subcontracting or outsourcing?
Executives frequently think about outsourcing or subcontracting as part of their never-ending push to minimize costs and boost productivity. The only issue is that a lot of these executives fail to recognize that they are not all one and the same, and as a result, run the risk of choosing a model that cannot provide the precise advantages they were looking for. Let us walk you through their functions, benefits, and important distinctions so you can determine which one is best for your company, whether you’re a business leader or a team member trying to educate one.
What is outsourcing?
The act of assigning duties that would often be handled internally by one’s own personnel to a third-party provider outside of a company is known as outsourcing. It is a great approach to save labor expenses while still having a great deal of control over staffing and procedures to assign such jobs, which may involve a single project, a number of activities, or a whole company function. In terms of location, there are three forms of outsourcing: onshore (partnering with a provider in the same nation), nearshore (partnering with a provider in a nearby or adjacent country), and offshore (partnering with a provider in a more distant country).
what is subcontracting?
Subcontracting is the practice of employing a person or business to carry out specific work that typically cannot be carried out by an internal employee or team. Importantly, it is only a temporary arrangement; no positions or departments will be permanently assigned. Instead, the task or necessity is decided upon the basis of a contract, and once the requirements of the agreement have been met, the partnership ends.
Reviewing the advantages
Advantages to Outsourcing
Choosing to work with a specialized outsourcing provider in a nation with lower living expenses, like Nigeria, can save labor costs by up to 70% and eliminate the need to invest in supporting infrastructure, including office space, technology, and equipment. Though many businesses originally think about outsourcing for financial gain, they quickly learn it offers a number of other advantages.
This involves providing goods and services that are of higher quality as a result of having access to talent pools that are educated and enthusiastic about their profession. In-house personnel is better able to concentrate on more important and fulfilling activities thanks to the opportunity to outsource time-consuming and repetitive tasks, which boosts productivity and results in a more motivated workforce. Additionally, outsourcing gives companies the freedom to swiftly and effectively adjust their human resource levels to accommodate seasonal demand and unanticipated booms or slumps.
Advantages to Subcontracting
In order to bring in specific skills that they may not already possess, subcontracting is a wonderful way for businesses to take on massive projects with ease. The fact that a contract’s terms are specified and that the subcontractor is responsible for completing a project or assignment by a specific deadline is another benefit viewed favorably by many businesses.
Working with a subcontractor is also less expensive than recruiting full-time staff members, but some companies feel constrained by this lack of direct control over the caliber of the individuals working on their projects. Subcontractors frequently operate alone on a project-by-project basis, in contrast to outsourcing providers who frequently collaborate closely with onshore partners on things like hiring, talent discovery, and staff development.
The main distinctions between outsourcing and subcontracting
Outsourcing companies can do activities in a limitless range of industries, including administration, marketing, healthcare, information technology, and financial services. More significantly, they are masters at handling repetitive, tiresome tasks that demand constant concentration. Although subcontracting is most commonly associated with the construction business, it can also apply to other industries, including IT, finance, and customer service, though this is typically more common with large-scale projects.
Chain of commandWith outsourcing, there is a direct chain of command between the provider and the onshore company, and both parties choose representatives to ensure clear lines of communication and responsibilities. As a result, internal managers frequently have direct influence over hiring, defining KPIs, and directing the development of offshore workers. Subcontracting involves an indirect line of command, whereby the employing business essentially appoints a totally other organization – with its own employees and methods – to carry out a project as they see fit.
Subcontracting versus outsourcing
For small and medium-sized enterprises who are just starting started or need to upgrade their customer service function, TeamSource offers call center and contact center services that are appropriate.