20 Jun 2012
There are mixed opinions on the topic of outsourcing but with its popularity growing and the anarray of potential benefits to be gained, it is something
that every business needs to seriously consider. The release of Deloitte’s 2012 Global Outsourcing and Insourcing Survey suggests that around 80% of businesses are currently outsourcing, or at least considering it.
If you are part of a business that is, at present, not considering the prospect of outsourcing, you may now be wondering how it would benefit you. Set out below are the main benefits companies see when they outsource:
By outsourcing work that your business is not fully competent in, you are able to save time and money. Your costs will be reduced because you are handing the work over to experts who are able to do the job quicker and at a higher qualit
y. Although this is going to cost you money, you are not wasting money paying your staff to do it at a slower pace. Instead these staff members are able to do the work on areas that are core to driving the business forward.
Outsourcing work that is not a core activity enables all the work that is done in-house to be focused on the decisions that really matter. No time is wasted on work that you aren’t fully competent in. By only focusing on core activities, the business is more likely to be successful and profits can be maximised.
Generally the people you outsource to are experts in their line of work. This means the work they produce for you will be of high quality and, most likely, a higher quality than it would be if you did it yourself. This allows you to be able to make better decisions because the work you are basing your decisions on is of expert quality.
If you are not fully ready to outsource, or have not thoroughly researched what to outsource and who to, it could end up hindering your business. Set out below are some of the disadvantages that can be seen when businesses outsource badly:
Deloitte’s survey stated that 48% of the businesses surveyed had terminated an outsourcing contract due to the work being of a low quality. This is why it is imperative to research the company you are planning to outsource work to, to ensure that they have the capabilities to meet your expectations. Before signing any contract, you should ask as many questions as it takes to give you peace of mind that they are capable of doing the work.
Often, when a business has outsourced to many different companies, it can lead to a breakdown in communication. This is because you have so many things to manage in-house, that dealing with lots of outsourcing on top of this can sometimes mean outsourced work is neglected. This, in turn, can lead to work being late, or not done at all. Communication breakdown can have serious effects on the logistics of a business, it is therefore imperative to take the management of outsourcing, and the correspondence with who you are outsourcing to, seriously.
Increased costs can come from a business underestimating the transition cost of transferring work to another company. Also, taking time to chase up companies due to a breakdown in communication, or the redoing of low quality work, ultimately means you end up paying more money than you should be for a piece of work. This then increases your overheads and leads to a lower profit margin, something that no business wants to see.
Are You Ready To Outsource?
Given the significance of the potential disadvantages, it is crucial to make sure you are fully prepared before you outsource. To get the optimum performance from your business, you should look to balance what you do in-house with what you outsource. Outsourcing is not only about saving money, it is a strategic decision as well. Therefore it is important not to simply look for the cheapest offer because this could lead to poor quality work that ends up costing you more. Some other factors worth considering before committing to outsourcing are set out below:
Is it a core business function?
Generally, so long as the work you are outsourcing is not a core business function it is viable for outsourcing. However work related to a core activity can also, in appropriate circumstances, be outsourced. For example, at Competitor Monitor, our clients outsource to us for pricing intelligence. Being experts in our field, we are able to provide them with vital information that helps them to make a decision on pricing. As this is the only work we do and because we have lots of clients, we are able to do the work at a lower cost than if our clients were to do the work themselves. Also, because we use the latest technology, the work we do is of the highest quality, so our clients have accurate information to base their decisions on.
Is it something you are competent at doing?
If you don’t have the competencies to carry out the work, it should definitely be something you outsource.
Can it be done quicker and cheaper by someone else?
There will be many areas of work that you are capable of doing in-house. However if these can be done by another firm for less money than it would cost you, or at a faster rate, it may be something that you should consider outsourcing.
Is Outsourcing For You?
Outsourcing, if done correctly, can really add value to a business. It enables a business to remain focused on the core activities, with peace of mind that the work being outsourced is getting done quickly and at a high quality. This saves time and money, giving the business a better chance of gaining a competitive advantage and maximising profits.