Outsourcing is when a company hires external vendors to deal with the processes of their business functions. A company can outsource any business process that can be done from an offshore location including functions such as payroll, transaction processing and order and inventory management.
Companies are also outsourcing call centre services. Some of the processes that can be outsourced to external vendors such as Paperchase Accountancy are business process outsourcing, bookkeeping service, image manipulation services, text and editing services, transcription services, OCR clean up services, call centre services, and data conversion services.
One major disadvantage of outsourcing is the loss of control over the function that has been outsourced. It is a good idea to weigh the pros and cons of outsourcing before outsourcing business functions. That said, here, experts at Paperchase Accountancy outline some of the pros and cons of outsourcing:
There are many reasons why businesses outsource activities or business operations. Some of the major benefits of outsourcing include:
Helps You Focus on Your Core Business Activities
If you outsource a certain task, job or process, you will have more time to focus on your core business activities. This will help you focus on the strengths of your business and help you think of ways to make your business better.
Can Help Make a Business More Efficient
Hiring an outsourcing company that specialises in the business function you want to outsource can help you make your business more productive and help your business run efficiently.
Saves You Money
Outsourcing can help you save money by helping you reduce payroll costs as you will not have to hire more employees to do the work you outsourced. You can use the money you have saved to invest in other areas of your business.
When you outsource a certain business function or process, you will get capability and facilities that aren’t accessible or affordable.
Greater Competitive Advantage
Outsourcing a certain business operation or process can help you leverage knowledge and skills alongside your complete supply chain.
Outsourcing can make a business more flexible and agile, enable it to adapt to changing market conditions and challenges while saving money and providing service level improvements.
Outsourcing entails handing over direct control over a business process or functions to a third party. This comes with certain risks. For instance, some of the problems you may experience when outsourcing include:
- Service delivery- which may fall below expectation or behind time;
- Lack of flexibility- contract can be too rigid to accommodate change;
- Management difficulties- any changes at the outsourcing company can cause friction;
- Instability- The outsourcing company can shut down.
Even though offshore outsourcing can help you save money, it has its own challenges like severance and costs related to layoffs of local employees who won’t be relocated internationally, hidden costs of provider selection or handover, and so on. Managing the offshore relationship, for instance, can be challenging because of time zones, cultural preferences or different languages.
Ensure that you weigh the pros and cons of outsourcing before outsourcing any task. The pros should be more than the cons. It is also important to look at some common outsourcing considerations.