Before you start outsourcing business operations, you should consider pros and cons of outsourcing. Often outsourcing is a way to save money, but there can be unexpected costs as well. The decision to oursource is certainly not one that any organization should enter into lightly.
Pros and Cons of Outsourcing: The Good
Possibly the most well known reason to consider outsourcing is to access cheaper labor. Workers in developing countries are paid far less than workers in developing countries due to the lower cost of living. Often these workers are not unionized as well, which further helps with cost cutting.
Cut Operating Costs
Even though your outsourced work must be paid for, often the costs are cheaper than if your company performed the operation itself. Lower salaries are a part of this benefit, but it goes much deeper. For example, each employee you don't working on site means one less computer you need to purchase and maintain. It also means that you spend less money on electricity to power the computer. The savings can be enormous depending upon your business operations.
Lower Labor Training Costs
Training new employees is expensive. This is especially the case in high turnover jobs such as customer service call centers. Each new employee may need one to three weeks (or more) of training before being able to start working. In addition, there are materials to create and trainers to hire. When you outsource your customer service call functions, the outsourcing firm takes care of all this.
Access to Better Technology
If you have a small business, you probably can't justify having all the latest technology for every employee. It just costs too much. An outsourcing firm, however, likely can afford the latest technology since that is part of their core business.
You can have employees working on site 24 hours a day. However, it is harder to attract talented employees to work less desirable shifts. This is no longer a problem with outsourcing. Your company can provide service 24 hours a day, with workers around the globe operating in the best shifts available.
Focus on Core Business
Chances are your company has something it does really well. It is the reason the company began in the first place. To run a business, however, requires skill in many different operations. Some of these operations take the focus away from what you do best. Solve this problem by outsourcing so you can focus on your core business.
Pros and Cons of Outsourcing: The Bad
Even though there are many reasons to consider outsourcing, there are also some negative aspects that need to be considered. Some of the disadvatages of outsourcing include:
Employees Feel Threatened
No one likes to think his or her job may be in jeopardy. Once your employees see that jobs are being outsourced, they may think their jobs are next. This can cause some employees to leave your company in search of one that isn't outsourcing tasks. It can also cause general uneasiness, which can lead to lower morale and less productivity.
Loss of Control
Once you let someone else handle part of your business, you begin to lose control. Customers may not be handled the way you prefer and management may make decisions you don't approve of. If total control is important to you or your business, reconsider outsourcing.
You may lose some of your customers once you start outsourcing. Some people, for example, prefer speaking with a North American customer service representative. If you outsource a function that used to be done on-site, some customers may feel disconnected knowing you no longer perform this function yourself.
It is more important than ever to protect customer information. Every company must deal with this issue. It is more challenging, however, to secure data when that data is in someone else's hands.
Lower Quality Work
In business, you often get what you pay for. While workers across the world can be very competent, the fact is sometimes they lack skills and education. If you need the finest employees, be prepared to pay for them, whether they are in your office or in another country.
These are just some of the pros and cons of outsourcing. Carefully consider them before you start outsourcing.