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Outsourcing is a familiar concept to many entrepreneurs. Small companies routinely outsource their payroll processing, accounting, distribution and many other important functions -- often because they have no other choice. Many large companies turn to outsourcing to cut costs. In response, entire industries have evolved to serve companies' outsourcing needs. But not many business thoroughly understand the benefit of outsourcing. It's true that outsourcing can save money, but that's not the only (or even the most important) reason to do it. Wise outsourcing can provide a number of long-term benefits

  Control Capital Costs
Cost-cutting may not be the only reason to outsource, but it's certainly a major factor. Outsourcing convert fixed costs into variable costs, release capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business. Outsourcing can also make your firm more attractive to investor, since you're able to pump more capital directly into revenue-producing activities.

  Increase Efficiency
Companies that do everything themselves have much higher research, development, marketing and distribution expenses, all of which much be passed on to customers. An outside provider's cost structure and economy of scale can give your firm an important competitive advantage.

  Focus on Your Core Business
Every business has limited resources, and every manager has limited time and attention. Outsourcing can help your business to shift its focus from peripheral activities toward work that serves the customer, and it can help manager set their priorities more clear.

  Reduce Risk
Every business investment carries a certain amount of risk. Markets, competition, government regulations, financial conditions and technologies change very quickly. Outsourcing providers assume and manage this risk for you, and they generally are much better at deciding how to avoid risk in their areas of expertise.