The pros and cons of outsourcing

The pros and cons of outsourcing

5 min read

 The pros and cons of outsourcing

A hot topic currently doing the rounds among business owners is outsourcing. Many are turning to it as a feasible option to address a wide range of operational challenges, from shrinking profit margins to high staff turnover. It may seem like a drastic step to send one of your business functions outside, but it could be worth considering, especially in today’s highly connected world of business. 

Whether it’s finance functions, call centre operations, IT, manufacturing or other services, outsourcing can help businesses overcome a problem area, gain a competitive edge or even grow. Some of the key factors driving the growth of outsourcing include labour skill shortages in certain areas and the availability of cheaper workforces that perform the same work without compromising quality. 

While outsourcing can deliver a wide range of benefits, it can also present some problems. It’s therefore essential to weigh up the advantages and disadvantages prior to outsourcing any part of your business.

 

Advantages of outsourcing

Speed and expertise 

In most cases, the tasks being outsourced are given to vendors who specialse in a particular field. They’ve spent years building their business, so they possess dedicated equipment and technical expertise that far outweighs the capabilities of most outsourcing businesses. This means that outsourced tasks can usually be completed much more efficiently and at a higher quality level.

 

Focus on core processes 

Administration and support services can really distract a business from their core business focus. By outsourcing these types of time-consuming and resource-sapping functions, you could find yourself with more time to strengthen your overall core business. 


Reducing operational and staff costs

One of the most obvious benefits of outsourcing is the overall minimisation of operational and recruitment costs. With outsourcing, there isn’t the need to hire expensive specialist in-house workforces or equipment. Those cost savings can be invested elsewhere in your business or go straight onto your bottom line. 

 

Disadvantages of Outsourcing 

Data risk 

Protecting the personal data of customers and employees should be a high priority for every organisation. However, when a business outsources call centre, HR, payroll or recruitment services, there’s the very real risk that this confidential data could become exposed. It’s worth checking on what data security measures the potential outsourcing vendor has in place before you provide access to any confidential information. 

 

Over-promising and under-delivering

All that glitters is not always gold. While outsourcing may promise the world, if you don’t choose the right partner you may have even bigger problems than the ones outsourcing was supposed to address. Some of the most common issues that occur when outsourcing goes wrong include stretched delivery times, poor quality outputs and responsibilities being neglected. Despite the potential cost savings achieved through outsourcing, it may prove easier controlling some of these factors inside your business. 

 

Lack of customer focus

As we mentioned, outsourcing partners are usually sought-after specialists in their field. And while your business is always top of mind for you, it may not be for your outsourcing partner, who may have a lot of other (bigger and more profitable) clients to service. Continuous monitoring of quality and the level of service you receive will help ensure you’re always getting the savings and efficiencies you first signed up for.

Before you start to seriously consider outsourcing, it’s advisable to look closely at all the pros and cons, as well as examining the importance of the tasks you’re thinking of farming out. Then, and only then, you can determine whether the pot of gold promised by outsourcing is real or just a dream.