The Perks And Drawbacks Of Outsourcing

More and more companies are taking advantage of a recent trend in the industry: the option of delegating part of your company’s duties through outsourcing. Outsourcing basically allows you to let third parties deal with services and processes which are essential to the company’s operation, those which can cost you more if these are performed as part of in-house functions. While this alternative may be appealing to fledgling companies (and even institutions with massive resources), outsourcing does have its drawbacks.

The following are a few of the things which any executive should consider before outsourcing any company duties to an outside party. For one thing, outsourcing is significantly cheaper when compared to in-house delegation; this is especially true if you choose to outsource the duties to an offshore party which asks for relatively lower rates. You can do more for less as a consequence. Since the auxiliary (though indispensable) duties of your company are taken care of, you can concentrate more on your basic competencies, such as logistics, in-house management, or product and service development. It lets you cut back on costs while you work on gaining an edge with your competitors in a tough market. Since you’ll also outsource the labor which is associated with the duty, you’ll spend less on personnel training.

Outsourcing is a competitive market in itself, especially in the developing countries, and as such, you’ll be able to compare the technologies and efficiencies of each service provider alongside each other, and choose the provider which is more competent and able in catering to your needs. As appealing as outsourcing may seem, it does have its disadvantages, and while outsourcing companies see the sudden influx of clients as a blessing, the client undertakes the option with certain risks. If the third party fails to deliver services as agreed upon due to an unexpected mishap, such as a bankruptcy, insufficient funding, and downsizing, the outsourcers receives the full brunt of the consequence. The control on the outsourced service also changes hands as soon as the duty is delegated to the service provider, and the company may not obtain the intended results due to differing priorities.

Don’t forget that service providers may consider your company as part of an extensive list of clients, and they may be partial to those which offer better rates and terms, by offering better services within faster completion periods. As if your prospects with service providers aren’t risky enough, your in-house employees may also see the move to outsource as a threat to their own jobs, and may respond accordingly with increased work turnover, reduced productivity, and substandard output. You’ll have to contend between the savings and risks of the venture, and consider it in the light of your company’s future prospects. Outsourcing is a relatively new trend, and most areas of the service sector currently embrace it with reservations.

It may take some time before it assumes a comfortable place as a normal corporate function, and you should weigh your options before you follow through on a trend just to keep abreast or get ahead of the competition.


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