Among the many things that a mid-size company fears, rising costs of labor feels like a nightmare. If the cost of labor goes up, a company can do nothing and pay the higher wage, or they can reduce the number of workers in the workforce. Either way, it’s a loss. This leaves companies wondering about what else they can do.
Imagine a mid-size business in the USA, thriving and expanding. The user’s vision is set, their team is passionate, but an unwelcome guest keeps knocking: the rising cost of labor. When inflation reaches a 40-year high and there are talks of increasing the minimum wage, such as the proposed $21.25 in Upstate New York by 2026, one’s aspirations for growth can start to feel like a precarious balancing act. However, there is a solution that does not require compromising one’s vision or the well-being of their team – strategic outsourcing.
Double Whammy: Inflation & The Great Resignation
Financial pressure is not an illusion. Inflation has gradually increased over the past decade, reaching almost 10%, which has resulted in a rise in operational costs. In addition, the Great Resignation has led to a situation where employees are seeking higher wages and improved benefits. This creates a challenging scenario for mid-size businesses.
Imagine a small marketing agency in California grappling with the challenge of affording increasing designer salaries while also dealing with soaring software costs. Or a manufacturing company in Upstate New York that is under pressure to raise wages as profit margins continue to shrink. These scenarios represent real situations, and the typical reaction of increasing prices or compromising on quality can negatively impact competitiveness.
To deal with such challenges, mid-size companies in the US have started opting for outsourcing services to countries where labor is cheaper than in their home country.
Unlocking Cost Savings & Flexibility:
Here’s where outsourcing comes into play, not as a magical solution, but as a strategic tool that carefully analyzes and reduces your cost structure. A company can save money and use it toward price cuts or new investments by outsourcing some of its operations. Their market competitiveness will improve, which bodes well for future sales and profitability.
By utilizing talent in regions such as India, where labor costs are considerably lower, one has the potential to decrease expenses by up to 70%. Companies don’t even have to worry about paying the cost of employee benefits, CPF contribution, medical insurance, etc. Because of outsourcing, salaries, recruitment fees, and training costs have been significantly streamlined, allowing for the allocation of vital resources towards growth-oriented initiatives. This will, in turn, create new jobs and opportunities for U.S. workers.
Some of the biggest names offering outsourcing services from India are Tata Consultancy Services (TCS), Infosys, Wipro, Cognizant, HCL Technologies, IBM India, Accenture, Tech Mahindra, and Capgemini India. Even though outsourcing has its pros and cons, finding a middle ground between the costs and benefits of outsourcing and thinking about how it will affect all parties involved is crucial. But it isn’t just limited to cost. It goes..
Beyond Cost-Effectiveness: Agility & Expertise:
Cost isn’t everything, of course. Moreover, outsourcing provides unparalleled flexibility. Want to bolster your development staff in order to complete a crucial project? Completed. Need specific legal knowledge for a brief situation? Not an issue. “One of the greatest advantages of outsourcing is that it can be done on an “as-needed” basis,” confirms Centris in their article. Due to the elimination of the need for capital expenditures, outsourcing greatly increases a company’s agility. Similar to having an agile workforce at one’s disposal, it lets them take advantage of short-lived opportunities and adjust to changes in the market.
According to Jim Coleman (co-founder of xFusion), in addition to the obvious operational benefits, it enables a company to deliver the same high-quality service to an ever-expanding customer base. The company can provide their consumers with immediate, 24/7 support. Consumers get answers to their queries more quickly, problems resolved more quickly, and brand loyalty increases. Which leads to the growth of a business.
The Smart Choice for Growth:
It is crucial to remember that the goal of strategic outsourcing is to strengthen a workforce rather than replace it. For instance, Cisco not only outsourced its software development but also set up its second-biggest R&D facility in India, which has more than 1,600 workers.
This was made possible due to the incentives offered by the Indian government to foreign entities. In addition to availing cheap costs and high quality of service.
They were able to send in-house staff on an HB-1 visa to educate their service provider. And strengthened their overall workforce by training them to their standards.
HP’s outsourced partners in India have also contributed to the company’s increased growth and profitability throughout the years. In order to meet the demands of their growing number of customers all over the world, they have chosen to expand their operations in India. Moreover, IBM started its outsourcing journey with India in 2009 and now it is believed that the company has more workers in India (around 130,000) than in the United States.
Outsourcing allows a company’s core team to concentrate on strategic innovation since they have freed up their important time and resources. Menal Partners provides customized solutions, smooth communication, and open cooperation in addition to standard outsourcing. The services provided by us are tailored to be easy to use and convenient for mid-sized companies.
One should not allow the increase in labor costs to hinder their growth. Accept the power of strategic outsourcing and watch their mid-sized ambitions take off. One agile, cost-effective step at a time, we are available to assist you in navigating that path.
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