Outsourcing has always been a strategic way for organizations to leverage their overall business potential. However, just like any venture, this practice has its own advantages and disadvantages that business owners have to be aware of.
Naturally, running and maintaining a business is not that easy. As the company grows, so as the challenges that come with it. This is why entrepreneurs should always have to look for better ways to improve your overall operations. With all the rapid developments in technologies today, you also have to adapt to these changes as you get on with your business.
Further, other challenges of growing a business may come in different factors. It may include the lack of manpower and other resources and expertise, improper planning, and financial management issues.
As we all know, technological innovations are continuously shaping the landscape of the market industry. While not all organizations are able to take full advantage of what technological breakthroughs have to offer, it has been made possible through outsourcing.
Outsourcing as an efficient business strategy
Outsourcing is when an organization subcontracts to a third party to perform some of its business functions. Companies of all sizes and in all types of industries are able to make the most out of this practice. Through the years, the outsourcing industry has evolved its services and functionalities to cope with the ever-changing demands of the market world.
Outsourcing adds more value to your business as it helps you reach your business goals and objectives. From individual daily operational tasks to systems management or development, utilizing an external service provider enables you and your employees to focus on what you do best. Further, your outsourcing provider will take full responsibility for your outsourced tasks or projects.
Advantages of outsourcing
There are many reasons why organizations opt for outsourcing. If anything, outsourcing, in general, helps businesses to boost their productivity and strengthen their bottom line.
To help you understand more about how this practice can help your organization, here is a list of its advantages:
Save on costs
One of the main reasons why a lot of companies outsource is that it allows them to reduce their costs. When hiring in-house employees, you will be required to provide them with training, resources, and workspace. Outsourcing has lesser expenses compared to having to hire permanent full-time staff. It also saves you some time on your recruitment process and onboarding.
Outsourcing providers have a pool of industry experts with diverse experiences from having to work with clients in different industries. Especially with offshore outsourcing, you will be given the opportunity to work with global talents at a cheaper cost.
Access to the latest technology
Aside from their highly professional staff members, outsourcing vendors invest in the types of technologies they use as it is a part of their core business. This also serves as their competitive advantage among other third party service providers.
In your end as the client, having to utilize better technologies and world-class equipment optimizes your daily operational functions. This, thus, improves your profitability.
Focus on core business functions
Organizations tend to overlook their core functions as they grow their business. In outsourcing some of your operational tasks, it frees up more time for you and your staff to focus on more important parts of your business.
Since outsourcing companies provide talents with specific fields of expertise, it reduces the risk of inadequate employee performance. More so, it also provides continuity to your daily operations, especially in those times when your employee turnover is at its peak.
Disadvantages of outsourcing
While outsourcing offers tons of benefits in the market industry, there are still companies out there that remain skeptical about giving it a go. Note that there are also downsides to outsourcing. As a business owner, it is essential to be aware of the following possible drawbacks before making a decision:
Loss of control
Farming out some of your business tasks also means that you are giving away these functions to your outsourcing provider. However, that does not necessarily mean you lose full control over your subcontracted tasks as they will still be reporting to you. Remember that your third-party provider will have their own way of doing things, whatever they see fit and you have to compromise to give them that freedom.
If you will be subcontracting tasks that include personal data like your customers’ information, there will always be risks for data privacy issues. Despite that, we now live in an age of data protection. Outsourcing providers ensure the safety and security of their client’s information. Make sure to include a security protection clause in your contract, or have them sign a separate non-disclosure agreement.
While outsourcing lets you save on costs, outsourcing providers usually have hidden costs included in their lengthy contracts. This is why there is a need for costs to be discussed up front as you negotiate with your chosen vendor. It is also your responsibility to read and understand their terms carefully before signing their contract, or you could end up paying for unexpected costs.
Shifting time zone
This is in terms of offshoring to a country with a different time zone. The biggest challenge here is the communication and the working hours. In working with your offshore staff, you have to adjust your meetings to viable times where everyone can communicate effectively.
Luckily, there are various communication tools available today. These tools make it easier for you and your remote staff to work collaboratively as well as track the progress of your offshored tasks or projects.
A different time zone can also be an advantage for some companies. One example of this is if you are offshoring your contact center, you will have the advantage of offering your services over extended hours, in some cases even for 24 hours.
Is outsourcing good for your business?
Now that we have discussed the advantages and disadvantages of outsourcing, you also have to remember that outsourcing may not work for everyone. The success of outsourcing will mainly depend on how you communicate and collaborate with your chosen outsourcing provider.
Further, if you take a look at what we have discussed above, the advantages of outsourcing mainly outweigh its disadvantages.