Outsourcing pertains to the allocation of jobs or business processes, mostly back office work, to third party specialists. Either a service provider or a skilled freelancer performs work your company cannot or would not deal with on your behalf.
Service providers carry out specific tasks requested by your company within a given time frame. Some outsourcing partnerships can extend indefinitely for as long both parties are in agreement.
Your chosen provider may ask you to pay a setup fee. In most cases, you will only pay for services rendered. Everything else, such as personnel hiring and quality metrics, will be handled by the service provider.
There are many reasons why companies outsource:
➨ Lack of sufficient manpower to carry out certain business processes
➨ Cut back operational costs
➨ Focus on core business functions
➨ Lack of in-house experts or specialists
➨ Overwhelming number of business processes
➨ Temporary projects
➨ Increase business efficiency
➨ Generate more income and opportunities
It is true that outsourcing has helped businesses and individuals in more ways than one. However, joining the bandwagon without a clear understanding of what outsourcing does for your business will only work against you.
Outsourcing may help reduce operational costs and pave the way for business expansion but it is not a fail-safe system. Yes, you can focus on key business functions but what about return on investments or long-term stability?
Companies planning to outsource specific operations must first understand the advantages and disadvantages of outsourcing before making a final decision. They need to decide whether the benefits outweigh the costs or vice versa.
Letting a third party vendor handle parts of your business operations has its fair share of risks. You go through a long list of considerations, from your provider's track record to the necessity of streamlining processes to whatnot.
While outsourcing works differently for different businesses, some people believe choosing the right service provider makes the risks worth it. Or does it?
How much do we really know about this business practice? Is outsourcing the be-all and end-all of cost-efficiency in today's technology-driven entrepreneurial landscape? Or are there ways to reduce operational costs and increase profit for your business without having to outsource elsewhere?
It seems there's a lot of explaining to do.
Before explaining at great length, let's look through this list of advantages and disadvantages:
First, the good news.
Many businesses outsource their operations in a bid to raise revenue streams and gain momentum. Outsourcing does present numerous advantages to those who can afford to adopt this practice. In a nutshell, it helps you:
➨ Focus on front line business functions such as income generation, marketing, business development and certain aspects of human resource
➨ Take your mind off time-consuming back office processes, particularly those clerical in nature
➨ Reduce operational costs and hours because of streamlined processes
➨ Save money on technology or infrastructural investments (service provider assumes all responsibility for backend work)
➨ Collaborate with process specialists who can provide quality work at a fraction of the cost you normally incur
For these advantages to take root, do a background check on your shortlisted outsourcing providers. Choose a legitimate company with a verifiable track record. Assess and discuss with fellow stakeholders which outsourcing firms are likely to provide you with the support you need.
Not to rain on your parade, but there is only so much that outsourcing can do for your company. While we just acknowledge its good points, there is no clear proof that such advantages far outweigh the disadvantages.
From 2000 to 2017, the global outsourcing marketing amounted to a whopping 88.9 billion U.S. dollars. But the industry has been on tenterhooks since 2016.
Gone are the glory days of business process outsourcing. Outsourced information technology services outearned the BPO industry by more than twice the latter's annual revenue.
That's not all, however.
Outsourcing creates a lot of vulnerabilities for your business. Though advantages and disadvantages vary depending on your industry or niche, you have more reasons to avoid outsourcing:
One of the main reasons why companies outsource is that they want to save money and reduce costs. So they go cheap and move a significant portion of their operations overseas. Offshore outsourcing does save money particularly if you outsource to countries with cheaper currency values.
By going cheap, however, you lose direct control over the processes you outsourced nor can you set your own quality standards. The service provider now has sole dominion over that part of your business. Your reputation ultimately depends on their performance (cross your fingers they perform well). It will be difficult for you to confirm the results because their headquarters is in another country.
Believe all the good reviews you read about your chosen BPO firm but at the end of the day, business is business. Some outsourcing companies are not upfront about other service charges. Take for instance setup fees and technological costs. You thought you're infrastructural and IT costs no longer apply since it's the agreement you had with previous service providers. Then came your invoice and you realise it wasn't the case.
We can't stop you from outsourcing your business processes. Just make sure your budget can handle hidden or undisclosed charges. Otherwise, you're just treading down a road of no return. Remember that litigation cases are costly and nullifying a contract takes forever.
When you hire a service provider, you supply salient information about your company. Imagine if you outsourced processes like accounting, website design and development, personnel recruitment, payroll and clerical tasks to a supposedly trusted firm.
With the growing number of rogue hackers and scammers online, sharing such information to third party providers – no matter their reputation – presents numerous risks. If not intentionally hacked, some internal issue might arise and accidentally expose confidential data like financial statements, employee payslips, client lists, contracts and bank account records sto individuals or groups who might use such data for their gain.
Having no direct control of your processes leads to bigger problems. One biggest challenge you have to face is to maintain the same level of quality. With an in-house staff, you can make changes where possible, but outsourcing means you let the service provider decide what quality is. And if their definition of quality does not coincide with yours, this could cause long-term quality issues for your company.
Many multinational firms experienced a surge of complaints after they outsourced manufacturing processes to countries with cheaper labour. Certain shoe brands known for quality lost their popularity and had to resort to drastic marketing to restore their reputation.
Unless you are prepared to make periodic visits to your offshore production site to rectify quality issues, you'll have to find another way to keep tabs on your outsourced processes. Your chosen firm has to accept your definition of quality and follow your standards to a tee.
Rather than outsource your business processes to offshore companies, we propose a better and more budget-friendly alternative: SEO services in Australia.
There is no need to pay hundreds and thousands of dollars to shady offshore firms. With SEO, all you have to do is create a strong online presence so much so that you double your returns within a few months. No need to share classified information or lose direct control over your back office processes.
Reputable SEO companies in Australia like Digital Muscle are equipped with tools and strategies designed to give your business a financial boost. What we do is help you maximise the digital space that's already there before you. Majority of the world's population transact business online, which means you have a readily available pool of target customers.
As the business owner, everything is entirely your discretion. You call the shots. You determine whether outsourcing is worth the risk or not.
If you want to know more about SEO, however, our doors are always open. Visit our homepage https://www.digital-muscle.com.au/ to know more about our SEO and how you can use it to leverage your business.
Choose the path that brings your business the growth it needs. And if SEO or web design happens to be that choice, we will support you to the best of our knowledge and expertise.