For the past decade, outsourcing has been a hot topic in the business world. However, while there are people who believe that this is a very helpful strategy, there are also people who are cynical about this business approach.
I, for one, believe that the benefits of hiring third-party vendors outweigh its disadvantages. But for the sake of being fair, we’ll tackle both the pros and cons of outsourcing, whether it’s nearshoring or offshoring.
1. Cost Reduction. There has never been any doubt whether outsourcing really does help cut costs. It most definitely does. There are many reasons why the amount a businessman would spend is less when they outsource. Here are some:
- Eliminate recruitment cost – advertising, agencies, and interviews.
- Eliminate cost from setting-up and maintaining work spaces and facilities.
- Save on holiday bonuses.
- Cuts sick pay & sickness cover.
- Cut back on maternity/paternity leave costs.
- Eliminate non-productive employee time – breaks, training, lateness, etc.
2. Higher Productivity. There have been studies proving that employees can better focus on their tasks without the distraction of an office. Also, when you hire a professional to do tasks that you are not familiar with, you can focus on more important things. This type of efficiency results to better productivity.
3. Promptness and Expertise. Most of the time tasks are outsourced to vendors that specialize in their field. You’re tapping into a knowledge base for better innovation. This effectively completes tasks faster and with better quality.
4. Time Zone Advantage. This is another benefit that pushes businesses to hire third-party vendors. Outsourcing to a country that has a huge time difference allows you to have the benefit of round-the-clock service. If that’s not beneficial, then I don’t know what is.
5. Staffing Flexibility. Businesses that have seasonal or cyclical demands are allowed to bring in additional resources when needed, and release them when they’re not needed for the time being.
6. Business Focus. When you hand over non-core activities to trained specialists, you’ll be able to handle more important activities that require your attention and skill.
7. Chance to Help People. When you offshore to a relatively struggling country, you are giving them more job opportunities, resulting to better economy.
These are the advantages that can so easily be named. But like I said above, there are disadvantages. What are those?
1. Risk of Exposing Confidential Data. This vulnerability to danger would most likely arise when the tasks outsourced have something to do with HR, payroll, and recruitment. The threat lies on the possible exposure of private information to third-party organizations. This is a serious disadvantage if it happens.
2. Lack of Focus. There are times that a vendor may not be working exclusively on your designated task. It’s possible for them to be juggling multiple projects in one go. This divided attention may result in less than stellar service.
3. Communication Barriers. This is pretty common especially when you offshore to countries in Asia. The language and cultural differences might add to the communication barrier. However, the Philippines have proven time and again that this is not something that is ever a problem when you outsource to them.
4. Loss of Management Control. This is a possibility that not a lot of people don’t think much about. This is more of a worst case scenario, but losing control of operations and deliverable of activities that you outsource is not impossible.
There we have it. You may see other articles posting more cons than pros, but if you take a closer look at it, they’re really just talking about the same thing over and over again.
Truth of the matter is, delegating tasks to vendors is a smart business move. With the economy’s status nowadays, outsourcing is the best way to run your business.
The disadvantages that may arise are only possible when you choose a wrong partner. That is why when you hire offshore staff, you need to choose one that has been proven and trusted over the years.