When it comes to outsourcing certain business functions to an outsourcing company, it can be a daunting task to try and figure out whether it is the right thing to do or not.
This article will explore the advantages and disadvantages of outsourcing to help you make an informed decision about whether outsourcing is the right choice for your business.
By outsourcing certain job functions to an outsourcing company, you can save money with lower labor costs. Outsourcing work to a third party means you reduce employee benefits, salaries, and other employee associated costs.
Outsourcing agencies (especially offshore outsourcing) often have economies of scale that allow them to provide services at a lower cost than your business could on its own.
In addition by hiring outsourcing companies, you reduce fixed cost overheads such as office space and equipment, which depending on your industry or service could be a big boost to cash flow.
When you outsource non-core job functions, it frees up your employees to focus on the work that they are good at, and that helps your business succeed.
For example, if you run an eCommerce business, you may want to outsource your customer service and order fulfillment so that your employees can focus on developing and marketing new products.
By outsourcing certain job functions, you can quickly scale up or down as needed. This can be especially helpful if your business is seasonal or experiences sudden spikes in demand.
The enables your business to stay ‘lean’ and not have to carry the burden of additional costs when they are no longer required.
When you outsource certain job functions, you can transfer the risks associated with those functions to the outsourcing company.
For example, if you outsource your outbound lead generation to a BPO company, you no longer have to worry about the cost and risk of hiring and training sales staff.
When you outsource job functions, you can tap into the expertise and skills of third party companies. This can be especially helpful if you are looking for specialised technical skills or knowledge that you do not have in-house.
Examples would be managed services such as:
If you outsource customer service or other support functions to an outsourcing company, it can help extend your business hours. This can be helpful if your target market is located in a different time zone or if you want to offer 24/7 support.
It can also be helpful if you have a small team and are not able to cover all the hours of operation that your customers expect.
By having outsourcing contracts in place for certain facets on the business, your disaster recovery processes can be massively improved.
As the outsourced company will be in another location to your business, should bad things happen such as a power outage or natural disaster, your business will still be able to function as normal due to the offsite backup that the outsourcing company provides.
If you outsource customer-facing job functions such as customer service or sales, it can help improve your customer satisfaction levels.
This is because these types of outsourcing companies are often experts in their field and can provide a higher level of service than your in-house team might be able to.
Employees in a small firm may have other responsibilities while dealing with consumer queries, which might result in a lack of complete attention and a drop in quality.
Plus, by outsourcing 24/7 support, you can ensure that your customers can always get the help they need, when they need it.
By outsourcing your non-core business operations, you can improve the communication between teams within your own business.
This is because when you outsource one or more tasks, you often have to set up clear lines of communication so that everyone knows what is happening and who to contact if there are any problems.
Sometimes within a business where everything is kept within your core team, accountability can often go out of the window.
By outsourcing, you may be certain that there is constant communication among all participants and that everyone understands exactly what they must accomplish and when they must do it.
Why do we say ‘perceived’? As with any service whether internal or external, it all depends on the quality of the service provider. The outsourcing industry is no different.
Every disadvantage we mention in this article can be mitigated by choosing the right BPO partner for your business.
If not integrated correctly, there can be discord between your company culture and that of your outsourcing partner.
This is because often with outsourcing, there is a disconnect between the company’s goals and the day-to-day tasks being outsourced.
It is important to ensure that when you outsource work, you do not lose sight of your company’s culture and values. You need to find an outsourcing partner whose culture meshes with your own.
Work with them, educate them the same way an employee would be within your own company and you will both have aligned business objectives.
It is true that when you outsource certain business operations, you are giving up some control of those processes.
If there are no clear lines of regular communication, outsourcing projects will very quickly deteriorate in quality.
However, if you choose the right outsourcing partner, you will still have visibility and transparency of all work being completed on your behalf. You will also have regular communication with your team so that you can provide feedback and input when needed.
In fact, by outsourcing, you can actually gain more control as you can focus on your core competencies and leave the other tasks to be managed by experts.
The many benefits to outsourcing such as being more cost effective can be lost with a BPO company that does not manage quality control.
However, only those who have the technical skills to accomplish your promised quality levels should be given one or more responsibilities by your hired third party provider.
Your outsourcing company must have a strong quality control team in place. This will help ensure that the project meets or even exceeds your expectations.
When companies outsource, data protection is typically the biggest worry for any business owner.
Stories of call centres in a foreign country mishandling customer data or worse, stealing it. Fortunately, large companies outsource operations to BPO partners as those instances are rare exceptions.
When you work with a reputable outsourcing company, they will have similar or better security measures than your own company.
In addition, when you sign a contract with an outsourcing partner, you can include clauses that make data security paramount and protect your data should any breaches occur.
While it is true that some roles may be redundant, this does not mean that the business has a reduction in numbers. The business can redistribute those actual costs to another department, meaning staff could be redeployed elsewhere within the organisation.
There are several reasons why small business owners and corporations alike outsource, and it isn’t to reduce numbers. It can be to focus on the company’s core competencies, to be more efficient, and to improve the bottom line.
The important thing to remember is that when you outsource, you need to have a plan in place for how your company will continue to function without those roles.
For a business to successfully outsource processes and tasks, it is important to partner with the right company.
The advantages of outsourcing particular tasks can be numerous, from reducing costs, simplifying project management or increasing your technical expertise.
However, there are several disadvantages to be aware of if not handled correctly, such as a loss of quality levels and a distinct difference in company cultures.
Communication remains at the centre of success when you outsource tasks to a BPO, the same way it would be with internal business practice.
If you are looking to focus on your core functions whilst you outsource particular tasks, contact us today to find out about our unique customer offering that makes business process outsourcing seamless.
Want to see some examples of successful outsourcing campaigns?
Read our articles of well known corporations of the business world who utilised BPO companies for numerous services over the past few decades such as software development, customer service and human resources.
In addition you can view our own case studies that give deeper insight on how we helped those customers focus on their primary goals and improve their bottom line.
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