Outsourcing is a modern business practice of hiring an outside party to get a part of the business process done. There are many advantages and disadvantages of outsourcing that can be seen in real-life scenarios of outsourcing. These advantages and disadvantages of outsourcing are helpful for organizations to decide whether to hire or not external help or to get the business using the internal employees.
Outsourcing is usually adopting by the organization as a method of cost reduction. When getting the job done using the internal employees is expensive, the organizations tend to hire the outside work for a lower cost.
Outsourcing has been first identified in the business industry in the 1990s and throughout the time it has become widely popular in every type of business industry. In this article, we will have a closer look at the Advantages and Disadvantages of Outsourcing.
Advantages of Outsourcing
Expertise Skills – When hiring a set of people as external help who are specialized in a specific project will give specialized skills and expert knowledge to the project. This can help the organization to finish the project quickly and efficiently and it can save both time and money for the organization.
Risk Management – When a certain project or process is outsourced, the risk of the success of the project or the process should be beard through the external party. That takes off a certain amount of risk off the organizational entire process risk.
An organization can focus on core business activities – Once the non-important business activities are outsourced, the organization can fully concentrate on the core business function and activities.
Controlled Costs – Outsourcing usually creates a lesser cost than the actual process with the in-house employees. This saves a huge amount of costs allocated to the process or the project and the organization can use the fund to improve the process or the project. These controlled costs are one of the main reasons for the popularity of outsourcing systems.
Competitive Advantage – Since the organization can use the knowledge of the set of expertise skills through outsourcing, it can achieve a competitive advantage in a particular market.
Disadvantages of Outsourcing
Confidentiality and security – Once a project or a process is outsourced, all the confidential details related to the particular project or the process should go to the external hire’s hand. This is a threat to the organization as it can be a threat to the company.
Lack of flexibility – Since the outsourced hires will work with the organization based on the contract made, making changes to the contract would be impossible. There is no flexibility as they have to stay stick to the contract signed.
Management Difficulties – The outsourced employees are managed by their management and the organization has little control over them. This can create unfavorable situations and disagreements between the organization’s management and the outsourced employees.
Hidden costs – There can be hidden costs in outsourcing the external parties for the process. These costs might not be visible in the initial agreements but they will implement the cost requirements to finish the project or the process.
Lack of customer focus and friendliness -An outsourced staff does not have to worry about retaining the customers as long as they can get paid for the assigned project. They don’t have the feeling to attract the customers for the product and they don’t have the customer focus to identify the customer’s requirements.
The above-mentioned advantages and disadvantages of outsourcing can guide organizations to decide whether to outsource their business processes or not. It helps to know both the pros and cons of the organization to decide on the implementation of the outsourcing team.