The Advantages and Disadvantages of Outsourcing

Outsourcing, a popular business practice has revolutionized the way organizations do business. Substantial cost savings, better availability of resources, and better workflow management are some of the definite advantages organizations gain when they outsource. However, it is a misconception that organizations delegating tasks to third-party vendors will always be functioning with efficiency. To get a better picture on this we will learn about both risks and advantages of outsourcing in this blog post.

Types of Outsourcing

Based on the location of vendor, the outsourcing process is grouped into,

• ONSHORE OUTSOURCING (DOMESTIC OUTSOURCING)
  • Here the outsourced vendor or the third-party vendor stays within the country. Say, the tasks are being outsourced to domestic outsourcing service providers.
• NEAR-SHORE OUTSOURCING
  • The outsourcing services will be provided by people of neighboring countries. Fewer time-zone differences, language similarity, and good geographical proximity are some of the benefits of near-shore outsourcing.
• OFFSHORE OUTSOURCING
  • Under off-shore outsourcing process, the business will be contracted to third-party members who are far away from the company home base. Organizations can enjoy minimized operation costs and will gain more time to focus on their core business competencies.
  • Now let’s learn about the possible gains and risks from outsourcing the tasks.

Advantages of Outsourcing

• REDUCED OPERATIONAL COSTS
  • To spend a large expenditure on non-productive tasks can truly harm the economy scale of an organization. The capital cost is certainly one of the major factors that every businessman desires to control. By outsourcing not only you will save money but can invest the same time in other revenue generating tasks.
• BETTER CUSTOMER SERVICE
  • Every business no matter how big or small does not involve only product research and development. It associates with a lot more and that includes call routing, a real-time chat with customers, and answering the customer service emails.
  • Sometimes time can be the biggest enemy, a hindrance to growth or you may be too occupied with other tasks to make time for these and somewhere it is like you are neglecting your customers.
  • So, the best way to save the day is to take a wise decision and outsource. Dedicated third party resources can give your business a competitive edge through better customer-service.
• INCREASED OPERATIONAL EFFICIENCY
  • With a large number of skilled employees onboard, you will meet every critical customer service metric and give nothing but standard work output.
  • In simple words, by having more skilled hands you can provide a better quality of service and improve the efficiency scale of your business.

Disadvantages of Outsourcing

• QUALITY RISK
  • The changing market demands nothing but a rapid response. Your outsourcing partner may be tied up with other tasks that he may take his sweet time in responding to your requirements.
  • Blame it on the poorly written contract or the in capability in planning a proper exit strategy.
• LOSS OF MANAGERIAL CONTROL
  • One of the potential pitfalls of outsourcing is you will not be boss anymore. Curse under your breath because that’s all you can do. Once you hand over the managerial control to third-party vendors you should not anticipate for the unforeseen situations.
  • Losing the managerial control over the wrong outsourcing provider may hurt your business more. Spend a little more time and find the right partner who can work on your ideas through regular collaboration.
• THREAT TO SECURITY AND CONFIDENTIALITY
  • A bad, unprofessional contract can land your business in trouble. It is worthwhile if you spend some good time analyzing the quality certifications of your outsourced business partner and conducting periodic security audits. Failing to do so, you may become the victim of data theft.