Table of Contents
Outsourcing is expected to grow tremendously over the next few years. According to Statista, the industry is expected to expand by up to US$114 billion by 2025. With outsourcing growth to expect in the years to come, companies have various opinions and beliefs about the pros and cons of outsourcing.
For most businesses, outsourcing can be a great way to improve efficiencies and reduce overhead costs. But for some, it doesn’t mean the practice isn’t without its own advantages, too. Outsourcing isn’t right for every situation, and before you move forward, it’s crucial to weigh the pros and cons of outsourcing. You’ve got to think long and hard before investing time and energy in taking this approach.
Here we’ve listed the pros and cons of outsourcing to help you decide whether this business strategy answers the needs of your business.
What are the Pros of Outsourcing
According to economists, outsourcing is a great business strategy to allocate resources to its most efficient use. Its impact on the global economy has been significant over the years. It creates a competitive edge for businesses to participate in the integrated global market.
1. Access to the Global Workforce
Outsourcing opens your door to experts worldwide. With the help of technological advancement, high-skilled freelancers, contractors, or service providers are now within your reach. Your business will have access to an extensive pool of professionals.
2. HR Flexibility
Outsourcing from a third-party service provider will save you time, effort, and the expenses that come along with it. Your outsource partner will take care of the tedious job for you.
3. Increase Efficiency
Outsourcing labor is a result of businesses wanting to do more and doing it as quickly as possible. When you outsource a service or product, you choose to do it with experienced experts. These workforces are highly skilled and they can get the job done in a shorter period effectively.
4. Achieved Economies of Scale
Outsourcing can help you get experts in a specialized domain who can give you higher productivity and efficiency. As your productivity increases, so as the costs you save. Therefore, achieving an economy of scale for your business.
5. Cost-effectiveness
Businesses generally decide to outsource to reduce costs. Outsourcing labor, goods, and services helps a business in lowering labor costs, operational costs, and increasing capital.
6. Business Expansion
Outsourcing opens the door to new opportunities as new markets are readily available to explore. Accessibility to specialized skills and comprehensive resources globally can help your business expand its offerings.
7. Business Adaptability
The ability to adapt to the ever-changing environment of the global market and its resiliency is what defines a business. Outsourcing will give you the flexibility to keep up with the fast-paced business conditions. Transitions and management are made easy as you hand over tasks, activities, business processes, or projects to third-party service providers.
8. Close-In Skill Gap
Outsourcing helps close skill gaps that may not be readily available in your local talents. You can get an experienced professional who specializes in the domain your workers may not. Your high-skilled talents can therefore focus on what they do best, yielding high productivity in both aspects.
9. Focus on Core Business Processes
Outsourcing can free up a lot of your business’ valuable time. The time-consuming processes and non-critical aspects of your business can take you off track from what matters most. Leveraging your outsourcing partner to do some of your business processes will save you time and money. You will be able to dedicate more time and budget to improve your core business functions and rise on top of your competition.
10. Reduce Risks
In every project or task handed, assessing possible risks and analysis is very important. It is when your outsourcing partner comes in handy. Since you outsource your projects to professionals with high skills in their areas of expertise, you will gain from their ability to manage potential risks.
Cons of Outsourcing
Like any other great strategy, outsourcing has its risks and challenges. It may negatively affect how you do your business. Let us take a better look at some disadvantages of outsourcing your business.
1. Increases Competition in the Global Market
Outsourcing has paved the way for greater competition in the global market. Businesses are turning to well-structured and innovative services from their managed outsourcing partners to get the edge to stay on top of the stiff competition. Those businesses that cannot keep up and do not have the means to outsource are the most affected.
2. Moral Dilemma
Outsourcing a portion of your business function to a third-party provider may cause a moral dilemma for your in-house team. Employees may not feel secure about their jobs. Creating a safe office culture and open communication is the key to avoiding this kind of situation.
3. Security Risks
The security risk is present whether you are doing your business locally or outsourcing it. Acquiring a service from a third-party provider may give you a feeling of uncertainty. It is the main reason you must choose a trusted partner to do business. A reliable security system in place will alleviate the risk of a security breach.
4. Challenging Collaboration
Teaming with an outsourcing partner in doing a project or task may be challenging at times. Different time zones and locations may cause teams to slow down the turnaround time, therefore delaying the output. On occasions when projects or tasks need immediate results involving team coordination and brainstorming, it could be problematic.
5. Cultural Differences
Whether you acquire a contractor overseas or a freelancer from the city next to yours, cultural differences may harm your business relationship. It may cause inefficiencies in the delivery of a project or task. Anything could be lost in translation, as one may have a different interpretation from the other. Awareness and understanding of how cultures differ will make a significant impact on the outsourcing experience.
Outsourcing has and will always be a complicated issue. People see it differently, depending on which side you are on. We cannot deny the fact that it has changed how companies do business today. It is a good business strategy for companies seeking a competitive edge at a lower cost. It helps companies gain more profits, increase their capital, and pass lower costs on to consumers. On the contrary, outsourcing created tight competition in the global market, making it hard for small businesses to keep up. It also imposes a threat of moral dilemmas on your employees, security breaches, and an issue of cultural differences.
Start Your Outsourcing Journey with Us
Unity Communications caters to all sorts and sizes of businesses. From start-up SMBs to big enterprises, our proven business model strategies and end-to-end solutions to your non-core business functions will help your business gain a competitive edge at a guaranteed lower cost and risks. Unleash your business potential. Schedule a meeting now.
