13 Jan Weighing Pros and Cons of Outsourcing in a Bird’s Eye View
For a certain company that intends to improve service quality while generating lower labor costs, carrying out an outsourcing process seems to be a great alternative for meeting what it needs to. As this trend significantly becomes a popular option in today’s commercial world, concerns questioning its efficiency have been raised by some, triggering a much cause of debates. In such a fast-changing environment we have nowadays, what is significantly advantageous for one can be treated as a disadvantage by another; thereby implying that things actually vary from each other’s perspective. The same perception applies to outsourcing. And so, what one needs is a clear understanding of the pros and cons of outsourcing.
Evidently, one of the main reasons and is likely believed to be the most influential factor why companies opt to outsource is to reduce costs and generate a potentially higher cost savings. Non-core tasks and functions such as back-office operations, management and administration, human resources, and the like that appear to be more expensive when done in-house are usually outsourced, since having an outside service provider is relatively cheaper in terms of labor wages than that of an in-house employee. Operating and overhead costs are likewise reduced in the procedure, thus, producing an increase in profitability and savings for about 20 to 60 percent, subject to some considerations.
Another benefit obtainable through contracting out non-core activities to a service provider is the opportunity for a company to focus on its core business by which efficiency and productivity can be ensured. As you allow the third party service provider to do such activities that your business does not specializes at all, you will definitely have the chance to concentrate and do well on your expertise. In that manner, efficiency and work management within the company can be easily and flexibly monitored. Once this is accomplished, it can serve as a competitive advantage.
Furthermore, subcontracting generally contributes to the economic aspect of countries. It specifically opens possible job opportunities for a number of unemployed job seekers and even full-time employees. Also, it allows a huge access to a number of specialized skills and up-to-date technologies that your company might need.
Meanwhile, there are also drawbacks brought about by outsourcing. The first thing one must bear in mind once involved in such process is that the company now does not have full control over the outsourced functions, and that you put a part of your business to someone else’s accountability. There are unwanted situations where quality of work suffers and is being compromised by the service worker. In such cases where resources are wasted and inaccuracies arise, the reputation of the company might be put into risk that can be a reason in losing customers, and thus, resulting to the observance of a severe loss in sales and profits.
Besides loss of incomes, increasing percentage of unemployment due to loss of jobs for individuals, especially in the customer service industry of the home countries, is also a negative outcome of the process, since companies will now prefer to send jobs overseas and have a third party service provider that will work for them in a much inexpensive approach.
Confidential information, sensitive data, intellectual property, and other security issues might be exposed to a large risk, such as bankruptcy, when the provider is not cautiously evaluated, and it spells trouble for all businesses. Other factors that are reflected to be disadvantageous include language and communication barriers and cultural differences. These small, yet crucial factors usually affect the process a lot. Poor communication between the two involved parties resulting to poor quality of product and low accuracy is basically the outcome of such barriers.
Knowing and understanding the differences between the pros and cons of outsourcing is a very important yet crucial matter, especially to those who are just initially starting their business. No doubt, this process can be valuable, but on the other side of the coin, can also be risky. As stated above, perceptions regarding the process vary; and in a greater sense, its effects also vary depending on the industry itself and the purpose for doing such. In the end, what you need to do first and foremost is a careful evaluation of these possible outcomes. With just a click on the Internet, you can now easily get the chance to read useful resources that can give you further knowledge on the pros and cons of outsourcing.
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