Benefits and Disadvantages of Outsourcing

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Tuesday, May 6, 2014

The term “outsourcing” has been with us for quite some time and businesses of all sizes are often confronted with decisions about which functions to perform on site and which to farm out to independent contractors.

Advantages of Outsourcing

1. Lower Costs

A business with only occasional need for delivery of products can avoid the cost of dedicated delivery vehicles and the associated overhead costs, such as drivers, maintenance and insurance. This is one very prevalent form of outsourcing, as the existence of various freight and courier companies would seem to indicate.

Another common function that is outsourced frequently is facility maintenance. Not having dedicated maintenance personnel allows businesses to focus on hiring employees who contribute to revenue and eliminates personnel with limited maintenance skills from wasting valuable time.

Those are just two common examples; there are dozens, possibly hundreds more.

2. Access to Expert Level Skills
Maybe you are moderately competent at certain business tasks, such as bookkeeping. Outsourcing this task to a vendor, however, often engages the skills of a dedicated expert with years of experience, certainly saves time and more importantly, energy that is best directed to key functions.

Disadvantages of Outsourcing

1. Takes Time to Realise Productivity

There is an initial investment of time, and generally money as well, into getting to the point in a relationship with a third-party where that relationship actually delivers the desired benefits.
This can be frustrating, especially if it causes delays in the delivery of goods and services, either those intended to be supplied by the third party, or others that have to be set aside whilst adapting to the vendor in areas such as communications and expectations.

2. Lack of Control

There is less control over the activities of a remote staff. Your work could easily be set aside as your contract employee assigns priority to another client who pays more, or has the potential to pay more.

Expect some growing pains for any function that seems likely to benefit from being outsourced. It may take some trial and error and a lot of patience, but it can supply long term dividends that allow businesses to focus on key competencies.

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