Deciding to outsource a business function is not always easy and requires an understanding of the costs to perform that function internally, as well as determining if it aligns with core competencies and strategic vision. Does the function fall outside of your company’s core competency and expertise? Is it draining valuable resources that can be better leveraged elsewhere? If you answered yes, it might be time to consider outsourcing. To help you thoroughly evaluate outsourcing and its impact, here are the top pros and cons to consider.
Pros of Outsourcing:
Working with an outsourcer creates a competitive advantage, as your company is leveraging experience, expertise and best practices that improve efficiencies and productivity. By outsourcing particular tasks and functions that do not align with core staff’s competencies, companies are able to improve performance and productivity.
Whether business volume is ramping up or winding down, experienced outsourcing providers will be able to adapt to demand quickly by utilizing their own resources. The ability to adjust staff as needed during those times of growth or slow periods ensures continuity and alleviates the financial pressure of recruiting and retaining staff.
Increased Facility space
Functions like warehousing and customer care centers require space, which can be problematic in periods of rapid growth or expansion. Not only can outsourcing alleviate the financial (and mental) burden of new facility acquisition or renovation, it frees up space for core activities, and allows you to grow without increasing your resource footprint.
Focus on Core Activities
Growth can be a resource sucker, causing you and your staff to focus on tedious tasks that are outside the normal routine and available expertise, which leads to inefficiencies and errors. Outsourcing will free up staff time by eliminating interfering activities, thus allowing them to focus on their core competencies and intended job-related activities. An added benefit is boosted morale, lower employee burnout and increased productivity due to reduced workload!
Cost savings is one of the largest motivators in the decision to outsource. Cost savings commonly comes from a combination of outsourcing attributes and activities such as efficiency, scalability and process improvement. When your company is able to save money on hard and soft costs, it will be able to reinvest it where it matters most.
Cons of Outsourcing:
Employees Feel Threatened
It is a common misperception that outsourcing equals downsizing, so just hearing the word can make an employee feel like their job is at risk. Whether outsourcing requires downsizing or not, it is important to remain transparent and reassuring to avoid low morale.
Outsourcing is generally cost-effective; however, there is always the possibility that you will incur additional costs, especially if something unexpected occurs. Most contracts are very specific, and clearly defining project expectations will reduce the likelihood of unforeseen costs.
Loss of Control Quality Control
Your outsourcing provider is probably providing similar services for other companies. In the wrong hands, your company’s product or service may not get the attention it needs, which could result in loss of quality and customers.
Depending on what business process is being outsourced, confidential or intellectual information can be involved. Your outsourcing partner’s security and information policies should align with the type of data being transmitted to safeguard client and company information.
When done right, outsourcing can be worthwhile for companies of all sizes in achieving business goals. Whether you are ready to implement an outsourcing strategy or you are new to the idea, knowing the associated benefits and risks enable you to make a more informed decision, as well as mitigate risks during the selection of your outsourcing provider.