September 6, 2017

Pros and Cons of Outsourcing

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Outsourcing or also known as Business Process Outsourcing (BPO) is a practice used by different companies whereby they allocate portions of work outside a company to perform a specific business process. This is done either domestically or internationally. For the past years, a large number of businesses, from start-ups to corporate giants are turning to outsourcing to improve efficiency and productivity while reducing overheads and staff costs.   

Weighing up the pros and cons of outsourcing services is crucial before deciding whether this approach is the right one for your business. While outsourcing has a variety of benefits, it is essential to evaluate the impact it can have as the decision to outsource should not be made lightly. 

 

Pros: 

  • Overall Cost Saving 

Cost saving springs to mind first. Laborers from developing countries are paid less than workers in developed countries due to the lower cost of living. Outsourcing also provides a larger talent pool which allows your business to hire the right people with specialized skills. 

Purchasing IT hardware, workspace and generally running large teams can also require a large amount of money.  The main countries providing outsourcing services also offer lower operational costs, meaning costs such as electricity or financial services can be minimized depending on your business operations and market conditions. 

Recruiting and training employees can also be very expensive and time-consuming in developed countries. When outsourcing this is taken care of by the outsourcing firm at a low-cost and the recruitment and training of staff can be streamlined. This is due to the number of skilled staff available. Outsourcing companies are used to recruiting and training large numbers of staff for specific roles so teams can be set up quickly, efficiently, and cost-effectively. 

Taking all of this into account, outsourcing can greatly reduce costs. However, this can only happen when done in the right way. Therefore, before fully committing, it is imperative the impact on your business is evaluated thoroughly and you choose the right outsourcing company to run your offshore operations. 

  • Focus on Business Core Processes 

Outsourcing enables businesses to focus on strengthening and improving their core expertise to achieve success and expand operations. When businesses go outside of their expertise and devote their resources to areas that are not related to their core business but are necessary for running their operation, time can be taken away from their main commercial focus.  

A good example of a focused business process is a bank that outsources its customer service operations to a third party company that specializes in handling customers concerns and queries.  

Supporting focused outsourcing processes gives businesses more time to enhance core business activities that are important without risking the quality of service in the main office.   

  • Round the Clock Productivity 

Since outsourcing gives your business more time to focus on core processes, productivity also increases. Choosing an outsourcing company that offers 24/7 support means you can support your customers round the clock with minimum effort and at a lower cost. 

Your businesses support staff, data entry and web development teams can all be supported through outsourcing.  

 

Cons: 

  • Hidden Charges 

Even though outsourcing is generally considered inexpensive, businesses should be aware of hidden charges. Sometimes charges occur that are not written in the contract. Outsourcing service agencies require business owners to sign lengthy contractual agreements which usually have fine prints. If not read cautiously, you could incur unnecessary costs. 

Spend an ample amount of time reading the contract before finally committing and fully agree to all services the agency will be providing. 

  • Loss of Business Control 

When your business has chosen an outsourcing partner and set up operations, operation processes might differ from the one your outsourcing partner has set out. Therefore it may be difficult to sustain the level of control you desire and the management might make decisions without your approval.  For this reason, it is important to continually communicate, train and set up the correct reporting processes to monitor business progress and maintain open communication.   

  • Quality Problem 

Despite all the great benefits outsourcing offers, it is only successful when the quality of service you expect from your workforce matches the quality you would expect when running the operations onshore or in-house. When quality is at risk it will leave a negative impact on your brand, reputation and customer experience. At times, customers have a poor customer experience due to language barriers that lead to confusion and misunderstanding. Those quality issues can be avoided through regular monitoring, training and discussing expectations upfront. 

There are other pros and cons of outsourcing that should always be taken into consideration. Be sure to do your due diligence and research your outsourcing partners carefully. The pros can dramatically outweigh the cons by partnering with the right provider.

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