The business term outsourcing basically refers to a modern day business practice whereby one business will enter into a contract with other businesses to perform specific tasks, projects or other functions of the company. Bucki (2017) explains that outsourcing or contracting out is generally used by businesses as a cost reduction method, a way to improve efficiency through arranging tasks, jobs, processes, and other operations. Any functions which are contracted out can be accomplished by working onsite or offsite of the company.
The use of computers has also played a major role in outsourcing tasks and because the internet establishes a global connection, many contracting companies can perform the necessary functions from either your hometown or from any other city around the world.
As far as outsourcing is concerned, many businesses look to the advantages in hopes of reaching higher profits and winning over their competition.
The biggest benefit to any business that chooses to outsource is probably the cost saving advantage. Many countries have an abundance of cheap labor primarily due to their local standard of living, and businesses located in these areas can often provide a variety of services including product manufacturing at a much lower price.
Overhead is a primary concern for businesses and a major reason for many of them to outsource. Many organizations are constantly looking for ways to reduce their overhead. Because of that, popular tasks such as data entry, billing, accounting, payroll, human resources, IT, and customer service are offered up as areas where businesses can outsource certain tasks to help reduce costly overhead.
Besides providing businesses the obvious benefits of cost saving and overhead, let’s look at some of the other advantages and also some of the disadvantages of outsourcing.
Advantages of outsourcing
Faster Work – Businesses with limited resources such as labor will outsource many jobs and tasks to save time.
Focus on What’s Important – More freedom to work on strengthening skills and core aspect of the business.
Work with Experts – Businesses can draw on the expertise of other companies and improve levels of performance within certain areas.
Further Reduction in Costs – Certain areas of work can be outsourced which makes it cheaper over hiring full-time workers.
24/7 Work Schedule – Businesses outsource certain tasks such as customer service, IT and other digital work which allows a non-stop work schedule.
Access More Functions – Software and cloud platforms online are allowing for some tasks and jobs to be fully automated, which ultimately provides businesses with additional free time to do what’s important.
Peace of Mind – Businesses choose to outsource with companies or agencies that will give them some peace of mind that the work is being done more efficiently.
Disadvantages of outsourcing
Loss of Control – It should be obvious when choosing to outsource, and that is having minimal control over the tasks being done, which includes monitoring, measuring, performance and quality. Trust is the biggest issue here.
Unexpected Costs – Outsourcing can be cheaper, but what are the hidden costs.
Security – What information are you giving up to a third party. There could be some risk to your business by sharing information such as personal data and trade secrets.
Quality – Maintaining the highest quality control can sometimes be difficult when outsourcing products and services. Cheaper and faster work is a good motivation for profit, but what about your customers who expect quality products and services?
Attention to Detail – Sometimes outsourcing companies will take on additional work during the project they are working on. This could cause your product or service to lose the full attention it needs (Riggins, 2017).
The bottom-line here is, there will always be some kind of advantage or disadvantage with any idea or project. And, the unavoidable fact is that outsourcing has provided an alternative way to do business. Entrepreneurs, business owners and leaders are continuously searching for ways to reduce costs, while still maintaining some form of quality product and service. Only time will tell if outsourcing is the best solution for your business, the economy, and the right choice.
Bucki, J. (2017). The advantages and disadvantages of outsourcing in business. The Balance. Retrieved from https://www.thebalance.com/what-is-outsourcing-2533662
Riggins, N. (2017). 20 Advantages and disadvantages of outsourcing from you small business. Small Business Trends. Retrieved from https://smallbiztrends.com/2017/02/advantages-and-disadvantages-of-outsourcing.html