Why do Companies Choose to Outsource Work?

Why do Companies Choose to Outsource Work and how do they do that?

If you’re struggling with tasks better handled elsewhere or can’t find the right in-house talent, probably think about outsourcing. But not sure if it’s really helpful or not and want to know why companies choose to outsource work.

In short, outsourcing isn’t just a buzzword; it’s a proven strategy that can help your businesses focus on what you do best while leaving the rest to experts. It is like gaining access to world-class talent, cutting operational expenses by almost half, and bringing your ideas to life faster. 

So, in this article, you will discuss, from why companies outsource to the best practices used by firms for their project—backed by real stats and insights.

Top 7 reasons why companies outsource: Real facts & stats

As we’ve delivered 1,000+ projects, earned 10+ awards, and gained recognition from top brands worldwide since 2010, we’ve seen firsthand how outsourcing can transform businesses. Below are our findings on why companies choose to outsource.

1. Cost-Effectiveness without compromising quality

From salaries and benefits to office space and equipment, the costs of maintaining an in-house team can add up quickly. That’s why cost-effectiveness is often the first reason companies consider outsourcing.

Here’s the kicker: outsourcing doesn’t just cut costs—it helps you invest smarter. So, instead of pouring resources into building an in-house team for every business function, such as if you want to build a mobile app. Hiring and training an internal team could take months, while outsourcing to a skilled agency who already has the tools, infrastructure, and experience to get the job done, could get you to market in half the time—without sacrificing quality.

Take this stat, Forbes reports that outsourcing IT can save companies up to 70% on operational costs, while Harvard Business Review highlights 20–30% savings on non-core processes like billing, payroll, recruitment, and lead generation.

So, in our research and view, outsourcing is especially beneficial for startups and SMBs, when every dollar counts.

2. Access to specialized talent

Gone are the days when talent was limited by geography. Outsourcing opens the door to a global pool of skilled professionals—people who are experts in their fields and can bring fresh ideas and perspectives to your business.

We already mentioned – cost savings are a big reason for IT outsourcing. But it’s not just about saving money; in discussions with our 500+ clients, about 48% acknowledge outsourcing as a solution to bridge the gap when suitable in-house talent is unavailable.

So, why struggle to find a React Native developer locally when you can tap into a global market of experts who’ve already worked on dozens of similar projects?

This isn’t just about hiring cheaper labor. It’s about hiring better talent. Whether you’re looking for a fractional CTO to steer your tech strategy or a team to handle your website maintenance, outsourcing gives you access to professionals who live and breathe their craft.

The best part? Outsourcing partners are often motivated to deliver top-tier results because your success is their success.

3. Focus on core competencies

In business, time is money. And let’s be honest—time spent managing tasks outside your expertise is time wasted. That’s why outsourcing is a no-brainer for companies that want to focus on what they do best.

Let’s say you’re a startup developing a groundbreaking SaaS product. Your core competency lies in innovating software solutions, not maintaining your website or handling customer support. So why divert your team’s attention to those areas when you can outsource them to experts?

But, this approach isn’t just for startups. Even major corporations outsource non-core tasks to free up internal resources. For example, during the lockdown(COVID-19), our staff augmentation services built a large team of highly skilled deep-tech software engineers specializing in Telecom, DevOps, Embedded Systems, and the Banking industry for India’s largest IT company, TCS.

Stat: According to Deloitte’s Global Outsourcing Survey, 65% of businesses reported that outsourcing enables them to concentrate more effectively on their core functions.

4. Scalability and Flexibility

Business needs change. Sometimes you need more resources for a big project; other times, you need to scale down. This is where outsourcing becomes your best ally. And, 

16% of businesses cite flexibility as a major factor in choosing outsourcing partners as it allows you to adjust your team size, skill set, and capabilities on demand. Need 10 developers to meet a tight deadline? No problem. Want to scale back after a project wraps up? Easy. You’re not locked into long-term commitments or hefty payrolls—you pay for what you need when you need it.

In a world where agility is key to staying competitive, outsourcing gives you the freedom to adapt quickly without breaking the bank.

5. Reduced time to market

Speed can help you get to market quickly and stay ahead of your competitors, but it can also make or break your business due to even a small mistake—whether you’re launching a new product, deploying software, or rolling out a service.

Don’t worry, outsourcing can accelerate your timelines by giving access to experts who’ve done it all before. They know the shortcuts, the pitfalls to avoid, and the most efficient ways to achieve your goals. 

So, instead of spending months assembling and training an in-house team, you can hit the ground running with seasoned professionals by outsourcing.

6. Access to advanced technology and best practices

Staying updated with the latest technology is challenging, not to mention expensive. From purchasing software licenses to training employees, the costs of keeping pace with innovation can be daunting. This is where outsourcing shines.

When you outsource, you gain access to advanced tools, methodologies, and technologies without bearing the full cost. Outsourcing partners invest heavily in staying at the forefront of their industries because it’s their bread and butter. By working with them, you tap into cutting-edge solutions and industry best practices.

For example, outsourcing IoT app development means leveraging expertise in cloud integration, real-time analytics, and device connectivity—all without having to build that knowledge in-house.

The added benefit? Outsourcing partners also bring experience from working across industries. They know what works and what doesn’t, which means fewer mistakes, faster implementation, and a competitive edge for your business.

7 Risk management and compliance

You know every business decision comes with risks. Whether it’s regulatory compliance, cybersecurity threats, or operational failures, navigating these challenges can be complex. But, outsourcing can help you mitigate risks by leveraging the expertise of professionals who specialize in managing them.

For instance, outsourcing IT services ensures your systems are monitored 24/7 by experts trained to handle security breaches, data backups, and disaster recovery. And a report states that 83% of IT professionals are considering outsourcing for security in the future.

Moreover, outsourcing partners often have robust frameworks in place for handling sensitive tasks. They’re well-versed in adhering to industry standards, whether it’s GDPR for data privacy or HIPAA for healthcare-related services just like we implement for Mediorbis. This expertise not only protects your business but also instills confidence in your customers.

Thus, in an unpredictable business environment, outsourcing provides a safety net. It allows you to focus on growth while your partners handle the complexities of risk and compliance.

Now that you’ve seen the secret sauce for increasing productivity without overextending your resources, if you’re planning to outsource, take a look below at the types of outsourcing and the services companies commonly outsource for their work.

Types & Services for Outsourcing 

Outsourcing is not just a one-size-fits-all solution. Different types of outsourcing cater to various business needs, and the range of services companies outsource is broader than you might expect. So, you need to understand the categories and services that can help you make strategic decisions that align with your goals.

A. Onshore Outsourcing: Onshore outsourcing involves hiring a service provider within the same country. This ensures seamless communication, cultural alignment, and adherence to local laws and regulations.

Common Services:

• Digital Marketing: Strategy planning, SEO, content marketing, and PPC campaigns.
• Legal and Compliance Services: Contract drafting, compliance audits, and intellectual property management.
• Custom Software Development: Building bespoke web or mobile apps tailored to local user expectations.
• Customer Support: High-touch services like complaint resolution or premium client support for local customers.

B. Offshore Outsourcing: It involves working with service providers in countries with lower operational costs. It’s often used for large-scale or cost-sensitive tasks.

Common Services:

• IT Development: Mobile apps, web apps, IoT app development, and cloud-based solutions.
• Customer Support: Call centers, live chat, and email support.
• Business Process Outsourcing (BPO): Data entry, document processing, and transcription services.
• Accounting Services: Bookkeeping, tax compliance, and financial reporting. 

Good news: We are based in India, and according to Orient Software, India provides 80% of outsourcing services, with more than 59% of businesses globally choosing to outsource to India.

C. Nearshore Outsourcing: Nearshore outsourcing refers to delegating work to companies in neighboring or nearby countries with similar time zones and cultural alignment.

Common Services:

• Software Development: Collaborative agile development for web apps, SaaS platforms, and enterprise solutions.
• Technical SEO Services: Website optimization and audits with a focus on local search.
• Digital Transformation Projects: Migrating to modern cloud systems or implementing DevOps practices.
• HR Services: Recruitment, payroll management, and employee onboarding processes.

D. Freelance Outsourcing: This type of outsourcing involves hiring individuals for specific, short-term projects or tasks through platforms like Upwork or Toptal.

Common Services:

• Content Creation: Blog posts, eBooks, and product descriptions.
• Graphic Design: Logos, banners, and branding materials.
• Web Development Tasks: Creating landing pages, updating CMS platforms, and fixing bugs.
• Video Editing: Promotional videos, tutorials, or product demos.

E. Project-Based Outsourcing: It focuses on hiring specialized teams or agencies for end-to-end delivery of a specific project.

Commonly Outsourced Services:

• MVP Development: Creating minimum viable products for startups.
• Custom Software Development: Complex, one-time projects like ERP systems or bespoke SaaS solutions.
• Marketing Campaigns: Launching digital advertising campaigns or market research projects.
• UI/UX Design: Comprehensive design services for websites and applications.

Now, I hope you understand which types and services best suit your needs. Undoubtedly, outsourcing offers numerous benefits, but before outsourcing, you should be aware of its disadvantages and the best practices followed by successful firms. This will help you save your business, money, and reputation.

Disadvantages of outsourcing

So, first, identify these disadvantages and then mitigate them with best practices that we discuss after this, to turn outsourcing into a profitable endeavor.

A. Communication Barriers: When working with teams in different time zones or cultural settings, miscommunication may occur. Simple misunderstandings can lead to delays or misaligned project outcomes. For example, feedback loops can take longer, and small clarifications might require extended back-and-forth, slowing down progress.

B. Quality Control Challenges: Not all outsourcing vendors have the same standards of quality. So, without proper oversight, there’s a risk of receiving work that doesn’t meet expectations. This is especially concerning for tasks that are customer-facing or directly impact your brand reputation.

C. Confidentiality Risks: When outsourcing tasks that involve sensitive data, like customer information or proprietary processes, there’s always a risk of breaches. Even with agreements in place, lapses in security protocols can lead to data leaks or compliance issues.

D. Overdependence on Vendors: Relying heavily on an external provider can make your business vulnerable. If a vendor encounters challenges—capacity constraints, financial difficulties, or leadership changes—it can disrupt your operations.

E. Hidden Costs: While outsourcing appears cost-effective upfront, unexpected expenses, such as additional revisions, extended deadlines, or legal compliance costs, can affect the budget.

So, try to adopt the following best practices we have gathered through our experience and research.

What are the best practices used by firms to outsource project work

The right approach helps you to overcome these challenges and turn outsourcing into a strategic advantage.

• Pick Your Partners Wisely: Note – The right outsourcing partner is more than a vendor—they’re an extension of your team. So, carefully vet their expertise, portfolio, and client reviews. A capable partner can seamlessly integrate into your operations and reduce risks like quality issues or communication gaps.

Tip: Always request a trial or pilot project to test their capabilities before signing long-term contracts.

• Clearly Define Objectives and Deliverables: Do you know? – Ambiguity is the enemy of efficiency for your project. But, providing precise requirements, timelines, and deliverables helps your partner align with your goals and reduces miscommunication. And, detailed project briefs can set the tone for consistent outcomes.

Tip: Use collaborative tools like Asana or Monday.com to create shared dashboards for real-time tracking.

• Secure Your Data: Data security isn’t negotiable, especially when outsourcing involves sensitive customer or operational information. So, use secure file-sharing systems and ensure that your vendor follows robust data protection standards like ISO 27001 or GDPR.
• Plan for the Unexpected: Business continuity depends on having a Plan B. That’s why you need to identify risks upfront, whether they’re related to delivery delays, resource availability, or sudden vendor changes, and outline contingency plans.
• Track Costs Closely: If you are with a limited budget, hidden costs can derail your budget, so transparency is key. Break down project costs into milestones and ensure you have a system in place for reviewing expenses periodically. To keep budgets in check, you can use project management tools that integrate cost tracking, like ClickUp or Wrike.
•  Build Long-Term Relationships: Trust and loyalty are everything for businesses whether it is with your customers or hiring agency. So, foster a strong relationship with your vendor, which can help you to gain a partner invested in your success for a long way. This may result in better collaboration, higher-quality work, and even preferential pricing.

Final verdict: 

In conclusion, after creating your business plan, if you are unsure what to do or how to proceed, outsourcing to the right agency can help you unlock your plan’s full potential and execute it effectively with expert guidance. This approach allows you to seize opportunities to innovate, grow, and adapt to market demands without overextending your internal resources. While challenges may arise, following best practices—such as selecting the right partners, ensuring transparency, and prioritizing security—can transform outsourcing into a powerful driver of success.

As based on a Deloitte survey, 59% of American companies choose to outsource to India. By partnering with a trusted agency like ours, which offers future-ready solutions, you can make the outsourcing process seamless, secure, and scalable.