Outsourcing is used by companies to fulfill areas of their workload by employing outside agencies or individuals. The potential benefits are extremely attractive if a mutually favourable relationship ensues, although some outsourcing dealings have proven to bring mixed results.
In this sense, business owners must be careful if and when they choose to outsource, taking into consideration all possible pros and cons.
Cost-Cutting – In many cases, the main motivation behind outsourcing is the cheaper expense to a company. You are only paying for the service required and thus reducing overhead costs. An effective outsourcing relationship will also increase overall productivity – this will keep spending down and help maximise profits.
Expert Knowledge – You aren’t expected to be an expert on every sector linked with your business. Outsourcing will combat this, filling the gaps in your knowledge and providing new ideas along the way.
Efficiency – With outside help, tasks can be dispensed to your own staff with more efficiency. Your team will be able to concentrate on their own duties and not bogged down in areas they aren’t fully comfortable with. Hiring a professional payroll administrator is an example of this.
Flexibility – The increased freedom of outsourcing is an attractive proposition for many companies. You can hire services as and when you wish, and only for as long as necessary. As a further benefit, if something doesn’t work out with the outsourcing partner or individual, cancelling the contract with them should be relatively simple.
Less Control – Of course, offloading tasks to external agencies can compromise the level of your work. You may have little or no control over the final outcome, a necessity for many business owners. Their production may not be up to scratch, or they could simply misunderstand the instructions, leaving you with a poor product and misspent time.
Slower Responses – Response times may be slower than you’d like from external companies. Your company may not be their prime concern and correspondence between the two parties can take time, potentially costing your business money in the process. Using foreign-based companies can complicate things even further in this regard.
Loss of Responsibility – With work being sent elsewhere, staff will lose out on the relevant experience to complete specific tasks themselves. Because of this, they may not be able to cope if the supplier falls into trouble, either with their own employment problems or breakdown of equipment.
Security Issues – Your business may be sending sensitive information to external companies when outsourcing. A degree of trust must be in place as your business will be held accountable if personal details are lost or exposed. They will need the appropriate security measures in place to protect these details.
Outsourcing is an approach used by many businesses in the UK. Necessary jobs can be completed by external companies, saving you time, money and hassle in the process. However, inadequate services can be a hindrance and leave your company contracted to a poor supplier. Consider the above pros and cons, and conduct your own research before committing to an outsourcing relationship.
If you liked this blog post then perhaps you’d like to read “The Difference Between Revenues & Expenses“?