Advantages And Disadvantages Of Outsourcing
Outsourcing denotes the practice of delegating work to another person or organization, usually a third party who is not associated with the business, and entrusting the responsibility of timely completion of such work on that person. The ultimate responsibility of the completion of that task, however, remains with the management of the business delegating the work. To understand more about the process of outsourcing and how to be successful in it check out this online course.
Business Process Outsourcing
Business process outsourcing is a very delicate topic of discussion. It involves outsourcing of key processes of a business to an outside person or organization and involves sharing of confidential data with such third party. Such processes could include handling customer calls for technical support after products are sold, processing of orders, payroll and so on. There are three different kinds of outsourcing depending on the location of the vendor to whom the processes are outsourced. On-shore outsourcing, where the outsourced vendor is located within the same country as the business, near-shore outsourcing where the vendor is located in another country adjacent to the business’ and finally offshore where the vendor is located in a far-away country. Outsourcing may work in some businesses while may be a risky adventure in others. Read more about the pros and cons of outsourcing for a manufacturing business.
Reasons For Outsourcing
Outsourcing definitely has its own advantages as well as disadvantages. Most organizations would do it mainly for the following three reasons –
- Non-availability of in-house technical hand required to execute the work
- Cut cost on a long or short term basis by outsourcing the work
- Better management of the in-house work flow when the concerned work is outsourced.
Disadvantages of Outsourcing
Loss Of Regular Monitoring
The day to day management of the work is definitely passed on to the outsourced partner. In spite of the fact that the business may retain some degree of control over the work and can even demand for more regular reporting, they don’t have the same degree of control they would have had on an employee sitting in the same premise.
Loss of Confidentiality
A major downside to outsourcing is that the business has to forego some degree of privacy over its core business secrets. It may additionally, have to also pass on information such as login details, client information, critical details about business processes and safety measures undertaken, so that the outsourced partner is able to execute the task in hand. Even if the outsourced partner is thoroughly tested for their internal security processes there is always the risk of data getting stolen or fraud being committed leading to loss of reputation and client confidence. This risk is particularly high where financial data are being handled such as credit card and banking details.
Poor Client Experience
A real and practical threat to the advantages of outsourcing is loss of client confidence. There is a growing number of businesses looking to offshore work to foreign workers at a price that is often a fraction of what a native worker gets. Even with extensive training and crash courses in adjusting to American culture, it is a proven fact that clients have a poor experience when speaking with foreign English speaking professionals. This leads to confusion and misunderstanding.
Then there is the question of more ‘physical’ impact. Every year the U.S. issues 65,000 H1B Visas to foreign workers and thus make them eligible to temporarily work in the US. An additional 20,000 visas are allotted to those foreign nationals who have some sort of a degree from an academic institution in the US. While the logic behind this program is to bring in skilled workers from outside the US to fill-in vacancies which are difficult to fill-in locally, such as jobs requiring scientific, analytical, mathematical and other prowess, this program is sometimes miss-used to bring in people who are willing to work at a compensation much less than a US native.
This has serious repercussions in the sense Americans, who are otherwise skilled to do the work, are laid off and replaced with foreign workers. This leads to a bitter feeling towards these foreign workers. Customers of the business who have had first-hand experience of being laid off to make way for foreign workers immediately have a strong negative feeling about businesses that adopts outsourcing (and of-shoring) practices. They are also highly likely to display abusive behavior towards foreign workers.
Loss Of Quality
Quality features both as an advantage and a disadvantage in this discussion. Outsourced partners, unless they have a stringent quality check in place, can quickly nullify the advantage that a business originally saw in the whole concept of outsourcing. Since all outsourcing contracts are drawn up in advance and there is not much room to leverage the price, outsourcing partners often resort to less than legal methods to make a profit, or as it happens in some cases, an extra profit.
Loss Of Moral In A Workforce
The whole concept of outsourcing has now come to be ostensibly linked with off-shoring and the grim picture of pink slips and job losses. Whenever there is word that a business is going to outsource it creates a loss in moral for the workforce. Even if a business is not actually showing people the door, the moral of the staff could easily be sagging when the word breaks out. It thus becomes imperative that the business takes its employees into confidence to keep them in the right spirits.
Loss Of Focus
No matter how dedicated an outsourced team is, it rarely happens that they can exercise the same degree of dedication that an in-house team under the constant and watchful eye of the management can. The reason is unlike an in-house team, at any given moment, an outsourced team is working on more than one assignments from different clients. Take the example of the outsourced contact center services industry. This can often lead to loss of focus and often mistakes that can assume critical proportions.
Advantages of Outsourcing
Hiring Of The Right Hands
The biggest advantage to outsourcing, as have been discussed above, is that a business organization is able to hire the right talent regardless of geographical boundaries. A business may require the services of a rare talent or skill, something that may be difficult to find in-house or even within the same geographical area. Such talent, however, may be easily located if the search transgresses the normal geographical boundaries. Thus comes the necessity for offshoring work.
Again, a business may find it cost-effective to outsource work to a third party which specializes in it. Let’s say a business needs a specialized marketing team to take care of its social media presence. It is not that this cannot be done in-house by hiring specialist staff, but if the work is outsourced they can not only hire the best talent but the day to day involvement would be very less as well. Regular monitoring is not necessary as the outsourced team is specialized. Even weekly reports are sufficient in such cases. The management is thus free to concentrate on the core activities of the business.
Efficiency Of Scale And Better Quality Of Service
A number of business processes can be effectively executed if a large number of skilled employees and a better infrastructure is setup. It may not be cost effective to do in-house. Outsourced vendors handling a number of clients can thus not only invest in skilled hands for a longer period of time but they can also take advantage of technological advances, employing the latest software and tools.
Speed Of Work
Imagine a business that requires a major online marketing drive. It can employ a number of Online Marketing specialists who can take care of different aspects of the marketing mix such as social media presence, direct mailing, PPC, etc. to execute the plan in a very short period of time. Speaking of social media, it is one of the most powerful channels for promoting a business. Social media platforms like YouTube can help a business to connect with its customers like no other channel. Learn more about how YouTube marketing can help a business.
If you want to find out how you can use outsourcing on a more personal level, get more work done and free up your time for other things, then checkout how you can outsource basically everything in your life to help you be more efficient.
Last Updated July 2020
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