In recent years, there have been a large number of businesses being outsourced from one country to another. Major outsourcing countries like India and Indonesia have made a profitable business by receiving many businesses from Western countries. It is an effective cost-saving method when used properly. While it seems like a good idea to outsource your business to other countries, it is important to understand the concept of outsourcing as well as be aware of its advantages and disadvantages before you decide to outsource your business.
Outsourcing means the practice used by different companies to reduce costs by transferring some of the workload to outside suppliers rather than completing it internally.
Outsourcing can be between companies in the same country or companies in different countries. There are several things to remember when choosing to outsource your business either locally or internationally. In order to make an informed decision on outsourcing, the pros and cons of this business method will be discussed in detail.
Here are the advantages you will gain should you decide to outsource your business:
· Save on money, time and infrastructure– These are the biggest outsourcing attractions. You get the chance to save the money spent on your business process because when you outsource, you will get the same level of quality offered at a much lower price. You are also able to save on time as you can outsource your business as much as possible and concentrate on your core business at your end. Not having to pay for the infrastructure of the outsourcing companies or yours will save you a lot of money as outsourcing removes the burden of changing or maintaining infrastructure. Based on some of the companies that have outsourced, it is reported that by outsourcing, a company is able to save up to 60% of the total cost
· Maximize revenue, minimize expenses– By choosing to outsource your business, you are able to maximize your revenue for the cost of your expenses will be less than if you were to complete your work internally. Outsourcing companies offer a much lower cost for the same service you can get internally or if you were to do it yourself. By sending your work out, you are able to get as much return as possible at a lower expense
· Access to specialized skills and services– In your company, your employees may not have all the core competencies you require to conduct a business. By selecting the right outsourcing company that specializes in this skill, you are able to get access to their professional service in that particular business process. This way, your company will not lack in any competencies to deliver your product or services. On top of that, you are getting this specialized service at a cost-effective price as discussed above
· Save on capital expenditure– When you are able to concentrate on your core business, you are able to focus on what you want most out of your business – increase in profits, productivity, level of quality, business value and business performance. Another party can handle all these can be achieved by outsourcing the process that you feel without compromising your quality of products or services. You are able to save costs you have to spend on training, as you don’t need to pay the internal work force for the business process that you outsource. In turn, you can get the now-available manpower to work and concentrate on your core business process by putting them to better and more productive use
· Save on investing on business needs– Because the business that you outsource will be conducted somewhere else, you don’t have to worry about investing in expensive software’s and programs to ensure your business is running. This will be taken care of the outsourcing companies
· Faster delivery time – Outsourcing companies make it their point to deliver the business back to you in a very timely manner. You can set your expectation and most of the times they will try to exceed that so that you are able to continue your outsourcing relationship with them. This benefits you in a good way because you are able to deliver to your customer on time if not faster than expected. This will give your company the competitive edge for being able to deliver on time and in turn increase your customer satisfaction
As much as there are many positive benefits of outsourcing your business, there are still a few disadvantages that you should know so you are able to weigh all your options before making any decision.
Here are some of the disadvantages of outsourcing your business:
· Possible quality problem– It’s worth to remember that your business may not necessarily be the only business the outsourcing company of your choice is receiving. Many but not all-outsourcing company are profit-driven. They will try to obtain as much business as possible for clients and promise a quick turnaround time. This, more often than not, has put quality on the line because it will cause delays and inaccuracy in the work output. Just make sure you are able to receive quality work even at the low cost-price you are paying
· Loss of managerial control – When you trust your work to another, you will lose managerial control over how the work should be done and the time it takes to complete it. You may have high standards and certain sets of mission to drive your company but you are not able to apply these for the business process that you outsource. You have to rely and trust on the outsourcing company’s etiquette to deliver
· Threat to confidentiality – If the business process that you outsource involves sensitive information like employees’ details or customers’ data, then you risk the safety and confidentiality of this information being compromised. Some of your customers or clients may not be happy that their information is shared with someone else. If this is a major concern for your customers, then there might be a possibility they will discontinue using your service
· Tied to the financial well-being of another – It would not be the first time a company is left hanging in debts when the outsourcing company of their choice ended up in bankruptcy and is forced to shut down. It’s a good idea to study the background and financial history of the companies first before you decide to have an outsourcing relationship with them
In general, it will be a good idea to outsource your business to other companies because it does have more advantages. However, it’s very advisable for you to exercise caution when making your selection of outsourcing companies before you transfer your business process to them to safeguard yourself from any loss or defamation.