The Pros and Cons of Outsourcing
Third-party outsourcing is growing in popularity among big and small businesses alike. Outsourcing, or “contracting out,” refers to the practice of hiring a third-party to perform tasks typically done by in-house staff. Jobs affected range from customer support to manufacturing. Outsourcing was recognized as a business strategy in the late 1980s, and later became an integral part of international business economics throughout the ‘90s.
The most common tasks businesses choose to outsource usually fall into three categories: repetitive, specialized, and expert tasks. Repetitive tasks include data entry, specialized tasks comprise of jobs like IT support, and jobs such as financial analyst fall under expert tasks. One trait these jobs have in common is that it’s not necessary for them to be done in-house.
Businesses can lower labour and overhead costs substantially by outsourcing tasks such as bookkeeping, graphic design, and customer/technical support. Virtual receptionists can also be outsourced: a remote first point of contact that usually performs the tasks of trained customer support personnel – sometimes around the clock – without having to maintain a receptionist’s office.
You may have the skills in-house to do it all, but while you handle all the minute details on your own, you might not be able to concentrate on expanding the core areas of your business, which can hurt you in the long run. However, there are downsides to outsourcing as well. It all depends on the needs of your business.
Perhaps one of the most obvious benefits to outsourcing is the savings. When you have a good outsourcing partner, you can get the job done at a lower cost, usually due to the difference in wages (since most of the work is done overseas where labour costs are much lower).
When you outsource certain work, you’re handing it over to someone experienced and with understanding of the job. This leads to an increase in productivity; you’re not just adding these tasks to the bottom of somebody’s to-do list within the office. Access to skilled resources also means faster and better services, depending on your outsourcing partner.
Focus on main goals
Outsourcing certain tasks means everyone in-house is free to focus on building your company and brand, as well as investing in research and development to take the steps necessary to expand.
Save on recruitment/infrastructure costs
Outsourcing cuts the need for investments in infrastructure since the responsibility of business processes falls on the partner. You can also avoid investing in expensive recruiting and training resources for your business.
A lack of communication between your company and the outsourcing partner may cause delay in the completion of projects or other issues. Different time zones could also contribute to communication problems.
If you decide to outsource things like human resources, payroll, or recruitment, you risk exposing confidential information to a third party.
Shortcomings in expectations
If you don’t choose the right partner, it could result in delays and sub-standard quality in output. Add to that the difficulty of regulating these factors outside an office and it defeats the whole point of outsourcing.
No customer focus
Outsourcing partners may be doing work for multiple organizations, so they may not be completely focused on the requirements of your specific business.
Before approaching a service provider or outsourcing partner, it’s beneficial to consider all aspects of outsourcing, and whether your company is in a position to benefit from its services. Once you’ve analyzed your requirements and are confident you would benefit from outsourcing, you can move on to researching a suitable partner. Consider these six elements when searching: reliability, quality, experience, range of services, good communication, and value for money. Don’t just select one that provides the lowest cost. Choosing a successful vendor will lead to first-rate results and benefit your organization in the long run.
Helen Jacob | Contributing Writer