outsourcing advantages and disadvantages - a review
Outsourcing is an established business tool that uses the best combination of low cost but high quality local and global resources in order to deliver the best service or product to customers. Using outsourcing services of an outsourcing vendor, small and large companies use one outsourcing service, or more than one outsourcing service, to provide a better customer experience.
While outsourcing is an attractive proposition, users of outsourcing services should give careful consideration to the pros and cons of outsourcing while receiving outsourcing services from outsourcing destinations such as India, China, the Philippines, and Brazil, etc.
Sure, outsourcing is a way to save money, but there can also be unexpected costs. The decision to outsource is certainly not one that any business or non-business organization should enter into lightly. To arrive at the right decision, users of outsourcing services should analyze the following advantages and disadvantages of outsourcing, as only they are in the best position to ascertain whether a particular outsourcing service or outsourcing services should be outsourced to an offshore outsourcing vendor.
The most significant advantages of outsourcing are:
Cheaper manpower and outsourcing
Manpower is possibly the most important resource in any company, and is also the constant resource that come at a high cost. For this reason, small and large companies undertake outsourcing services to India of various types. Professionals in outsourcing destinations such as India and the Philippines have a much less cost to the company, both fixed and variable, as compared to the same professionals in the West. Often, these workers are not unionized as well, which further lowers manpower costs.
A major advantage of outsourcing services to India is that India has wide spectrum of outsourcing vendors offering every price point to clients—from the giant Infosys that charges premium rates to middles-rung dedicated outsourcing vendors such as VirtualEmployee.com, and vendors that charge cut-throat prices for outsourcing services.
Outsourcing enables companies to cut operating costs
Even though outsourcing services are paid for, often the cost of an outsourcing service in an offshore location is cheaper than if the company performs the operation itself. Lower salaries are a part of this benefit, though the benefits go much deeper. For instance, each employee that does not work “on site” means one less computer, and no extra or costlier maintenance costs.
Cost savings can be enormous depending upon the type and scale of business operations of a user of outsourcing services. For instance, training costs can be prohibitive in a any kind of company. This is especially the case in high turnover jobs such as customer service call centers.
Each new employee may need one to three weeks (or more) of training before being able to start working. In addition, there are materials to create and trainers to hire.
By outsourcing services to India and other outsourcing destinations, a company can take care of these costs as outsourcing vendors employ highly trained and experienced professionals, and often vendors can absorb training costs.
Increase in productivity is a natural by-product of outsourcing
Theoretically, a company can have employees working on site 24 hours a day. However, it is harder to attract talented employees to work less desirable shifts. Outsourcing is a very useful intervention that enables companies’ employees to work round the clock without adding to employee turnover and loss of productivity. Time-zone differences allows businesses to outsource to outsourcing vendors all kinds of outsourcing services to cover the 24-hour cycle as well as to be more productive to their own clients.
Top and middle management can focus more on strategizing on adopting outsourcing
Every company does a few things better than its competition. Those are the reasons the company began in the first place. A business that is growing, though, often ends up with its top managers involving themselves in doing many things at the same time—in the bargain dissipating core strengths of a company.
Some of these operations take the focus away from what a company does best. Outsourcing vendors offer a whole range of outsourcing services that can free the hands of top and middle management so that they can concentrate on growing the business.
Outsourcing also has a flip side—the possible negative consequences are :
Yes! Outsourcing also has a flip side—the possible negative consequences if outsourcing is not managed properly.
Loss of control can occur due to outsourcing
By default, outsourcing involves contracting one or more activities to a third party. Involvement of an intermediary can always pose problems if they are not well selected or the outsourcing services agreement they have signed with the client is not a proper one. Furthermore, outsourcing involves delegating supervision, and creates an extra tier of hierarchy in the form of the outsourcing vendor and its employees.
Loss of customers is possible due to outsourcing
A company may lose some of its customers once it starts outsourcing services to India or other outsourcing destinations. Some people, for example, prefer speaking with a North American customer service representative. If a company decides to outsource a function that used to be done on-site, some customers may feel disconnected as the company no longer performs this function itself.
Security issues and outsourcing
Both small and large companies generate and store data that can be critical or inconsequential, but important nevertheless. Also, to secure data when that data is in someone else's hands is harder. Nowadays, most outsourcing vendors take adequate precautions to safeguard data of clients who undertake outsourcing services to India and other outsourcing destinations.
Lower quality work can result due to outsourcing
If outsourcing vendors are not chosen well, or if user of outsourcing services doesn’t manage the outsourcing vendor properly, then it can result in low quality of work. There can be a skill or experience differential with respect to outsourcing vendors. To safeguard against this threat, companies that want to work with quality professionals, are prepared to pay well, even if it reduces their profit accrued through outsourcing.