Many have the idea that all tasks should be outsourced so as to reduce operating costs of hiring in-house employees to complete the job or to streamline the business’s efficiencies. However, before outsourcing any part of your business, you have to understand the advantages and possible disadvantages that outsourcing will bring.
Read on to assess whether to continue or avoid the idea of outsourcing for certain operations and decide the significant impact that will be incurred to your company.
What are the Advantages of Outsourcing
The advantages of outsourcing include:
Outsourcing tasks such as back-office operations or administration frees up your company’s resources, allowing you to focus on the core functions of the business
Outsourcing has a lower labor and operational costs as well as a reduction in overhead expenses as compared to hiring in-house staff
Savings on technology and infrastructure
Outsourcing doesn’t take into consideration the costs of infrastructure costs as the hired personnel will have the full responsibilities for the business processes and hence, developing the infrastructure for the same costs
Having a skilled resource, the business can easily seek for the right talent and assuring higher quality of outsourced work done
Increased work efficiency
Outsourced vendor brings in specialized knowledge and the adequate knowledge, leading to an increase in productivity and efficiency of your business
Outsourcing tasks removes large share of risks as they are shared among the outsourced vendors which is beneficial as your company will face lesser risks of having to pay fines or penalties
If businesses that has cyclical or seasonal demands for operation to bring in extra staffs, outsourcing create opportunities to avail of additional resources as staffs can be realized when they are no longer required as outsourced vendors have taken over
What are the Disadvantages of Outsourcing
Although there are many pros of outsourcing your company’s functions, you should also note the disadvantages that follow, which include:
Loss of managerial control
Once the external vendors are hired, the managerial control belongs to the other company and there could be a risk of the contractor enters into transactions or doing things in the name of your company which you would not approve, damaging your company’s reputation.
It is almost not guaranteed that your vendor is driven by the same mission and standard that drives your company. The contractor’s main focus is to help the business make a profit.