Outsourcing is still a hot topic these days for organizations. It is an allocation process of specific business processes to an external service provider. Once the tasks are outsourced to 3rd parties, it will be their responsibility to carry out those tasks, maintain the company’s assets. Outsourcing has many benefits that can be leveraged but disadvantages should be considered prior to assigning any component of the organization to an external vendor.
Benefits of Outsourcing
- Lower recruitment and operational costs
- Access to foreign market
- Access to better technologies at a lower cost
- Vendor expertise - tasks can be carried out faster, more effectively and often with better quality
- Improvement of productivity, efficiency and service quality in-house
- Competitive edge in the market against competitors who have not yet considered outsourcing
- Concentration on core competencies and process
Disadvantages of Outsourcing
- Hidden costs
- Risk of exposing confidential/classified information that can bring a threat to the company’s security, privacy and confidentiality
- Serious problems and difficulties if the chosen service provider refuses or can’t finish work for different reasons e.g.: lack of labor, lack of funds or even bankruptcy
- Lack of communication
- Possible loss of management and control over the outsourced processes
- Lack of customer focus - the service provider can be working for multiple companies at the same time. This could very well mean that your company’s tasks may not be done with the outsourced partner’s complete focus.
- Cyber-crime threats
It is very important to consider all the advantages and disadvantages before actually choosing a 3rd party vendor but it is also crucial to the company’s success to find the right service provider. If you make your decision carefully then you can leverage on the benefits that outsourcing can provide and these advantages will weigh out the possible disadvantages that can be avoided by choosing the right partner.
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