The Pros & Cons of Outsourcing for your Business
Businesses are using outsourcing as a means to cut down on their operational costs, and ensure innovation and efficiency in their operations. Large scale or small scale, there are pros and cons of outsourcing for businesses of all sizes and types.
A company may not be equipped to handle all processes internally, or certain processes may be short-term in nature, hiring full-time professionals for which may not be a feasible option. This is where the outsourced company takes up the responsibility of undertaking these tasks effectively.
Why Do Businesses Outsource?
Outsourcing in businesses is catching up as a trend because of a number of reasons –
- Absence of a workforce with the required skill-set
- Availability of low cost workforce that provides low-quality work
- Need to focus on more important and crucial business operations
Why do companies outsource
Source: Deloitte’s 2016 Global Outsourcing Survey
Pros & Cons of Outsourcing in Businesses
As an entrepreneur, before you decide to take the decision of outsourcing certain processes of your business, it is important to consider these advantages and disadvantages of outsourcing.
Disadvantage – Lack of control
Advantage -Increased Efficiency
Outsourcing the operations of an entire department or a single job to an outside agency on a contract basis usually ends up in you handing over the control of that function or that department to another company and outside the realms of the management. The other company might have different ideologies, standards, and mission and the goal of this agency would probably be to make this business deal with your company a profitable one for theirs.
However, the goal of making a profit could really push the outsourced company to deliver results and use its expertise and experience to the optimum in doing so. This can ensure that the quality of work being delivered is high, eliminating the need and cost for you to train an in-house employee to deliver the same quality of work.
Additionally, outsourcing can ensure your employees invest their time and effort into the tasks that add value to the operations of the business, instead of wasting themselves over day-to-day mundane activities.
Disadvantage – Hidden costs
Advantage – Lower Costs
It is extremely important to ensure you have all the work details and costs involved, covered specifically, in your outsourcing contract. Any work detail that does not form part of the contract could mean an additional and an unforeseen charge to your business.
Once the terms of the contract have clarity, outsourcing can help your business save on expenditure of employing several individuals, training them, and have them provide those services within the organisation. The cost of benefits, payroll taxes, on-boarding expenses, and training expenses, can all be saved through outsourcing.
Disadvantage – Quality issue
Advantage – Larger pool of talent
Outsourcing can turn out to be beneficial for your business only when you receive good quality work. A quality that does not match up to your expectation or your company standards will only lead to a waste of money and loss of value for your business. This is the reason why it is important to put forward your expectation regarding the quality of work from the beginning.
With an in-house employee, your access is limited to the talent and the skill-set that exists within the company. In cases like these, you either settle for what you have or you invest in upskilling your existing employees to meet your expectations. With outsourcing, you expand the horizons of finding a pool of talent across the globe.
Disadvantage – Negative impact on the company culture
Advantage – Keeping up with the current work trends
Outsourcing can pose a challenge to the company culture and employee happiness if not handled carefully. Your employees can feel unwanted and unsure about their role in the company. Also, co-ordination of the workflow between your resources inside and outside the company can be difficult. The negative impact that outsourcing can have on your company culture and employee happiness needs to be taken care of before you even begin the journey of outsourcing. Maintaining clear communication is the key to handle this.
When done correctly, by outsourcing for your business, you will be keeping up with the changing work trends – the need for flexibility at work and upskilling of your existing employees.
The Future of Outsourcing
Outsourcing is likely to grow exponentially in the coming years with the use of centralized technology. Advanced tech and IoT, like chatbots and AI are going to introduced further in outsourcing businesses to keep up with the pace of work trends.
All in all, entrepreneurs today are leaning more and more towards outsourcing, and being aware of the pros and cons of outsourcing is important to be able to reap its benefits to the optimum while minimizing the risk.