Advantages and Disadvantages of Outsourcing
27th Feb 2017
Why will an organisation outsource their work?
Most organisations will outsource their work due to the following reasons:
Absence of in-house resources needed to execute the job
In order to reduce the costs
The in-house team can fully concentrate on primary activities if they bestow the secondary activities to the third-party
The advantages and disadvantages of outsourcing have been listed below.
The benefits of outsourcing include:
Focus on Core activities: With time, the back-office operations of an organisation increases, which consumes both financial and human resources. Outsourcing these back office operations that can also be termed as secondary activities will save both your time and resources. Outsourcing will help your in-house resources to entirely concentrate on the core activities.
Overhead costs: The overhead costs of performing back-office operations are pretty high. By outsourcing it completely, you can bring down the expenditure up to a certain extent.
Centre for Innovation: Most of the companies consider outsourcing companies as centres for innovation. According to an outsourcing survey conducted by Deloitte, 35% of organisations are focused on evaluating the innovation quotient in their outsourcing partnerships.
Disadvantages of Outsourcing:
The disadvantages of outsourcing include:
Losing Control: When you outsource your work to a third-party you obviously lose control of the tasks being performed. You should always keep a tab on their performance and opt for weekly meetings with your partner
Hidden Costs: There is a wide number of options available in the market. You need to carefully read the documents before signing it. Many of them incorporate fine lines in between the legal documents, hence it is important to consult a lawyer so that he or she can guide you through it.
Loss of Confidentiality: A major turndown is you have to share information related to the business with the third-party. You have to hand over login credentials, database and many critical details of your business to your outsourcing partner so that they can do the work for you. Even if your outsourcing partner follows strict security procedures there is always a fear of your data landing in the wrong hands. The risk is higher when you need to hand off the financial data to the third-party.
The bottom line is despite the disadvantages involved outsourcing will help you to expand your business and reduce your expenditure.