Pros and Cons of Outsourcing

Published: 05th April 2009
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A lot of blue chip companies, as well as budding corporations, make use of outsourcing to take advantage of several aspects. Outsourcing provides companies the chance to save more capital by seeking manpower from other sources.

A number of agencies have already downsized because of the looming financial crisis. Crowley, a huge company, has downsized thousands of workers and has chosen to outsource instead.

Many companies in the United States prefer to outsource because of the capitalist structure of the economy. Small businesses are also gradually following huge scale companies to have a more efficient system at a reduced cost than what they would normally pay average workers.

A good example is Mike Filsaime, a marketer who formerly functioned as general manager of Toyota in New York City. He has now more than 20 employees working full time for him over the internet.

What is Outsourcing?

Outsourcing is the process of transferring management and daily execution of functions to an external service provider. The service provider and company will enter an agreement sealed by a contract. Means of production will be provided by the client company in the form of manpower, resources and assets.

Some of the usual aspects or functions outsourced by huge and small-scale companies include information technology or IT, accounting, customer support, and human resources. Other functions that are usually outsourced include telemarketing, web development, ghostwriting and CAD drafting.

Outsourcing may also be referred to as offshoring. Multi-sourcing describes big outsourcing contracts, usually covering the IT division. The process allows various parts of a client business to be sourced using various service providers.

Strategic outsourcing is the organizing arrangement that arises when companies depend on intermediate markets to offer special functions.

Should You Outsource?

Any company has the choice of outsourcing a particular function or doing it using the available resources and manpower in-house. Deciding to outsource is done at a strategic level, usually needing approval from the board.

Outsourcing leads to supply chain function being done using a third party. The process starts with the firm selecting the particular activity to be outsourced and giving justification to the choice. If it is established and approved, the search will begin for the best outsourcing partner.

The Pros and Strengths of Outsourcing

Communication has been enhanced significantly by the internet, so bosses can easily make commands and other changes, simply by using tools and methods available online.

Meetings can be held using online conferences. There are also other gadgets and technologies available at present that can help bosses and managers get in touch with different workers belonging to particular sections, regardless of time and location.

Leverage is one of the most advantageous aspects of outsourcing. Business owners get to save more money, save more time, as well as conserve effort in directing sales and other transactions in the business.

Since the owners can acquire individuals living on the other end of the world, they can adjust the salary according to the standards of the given area. They can easily seek willing workers who are also quite comfortable with their pays, thus leading to more efficient and happy employees.

Delegation is very important in running a multi-faceted company. Owners may divide the company into sections and categories, assigning different online workers for each and oversee the entire operation to prevent common pitfalls. They have the opportunity to brainstorm the pros and cons of outsourcing and develop effective ways to let the business grow.

Delegating allows business owners to acquire people with specific talents. This is highly important if your company involves several functions and offers a variety of products and services. In some cases, company owners may need to pay very skilled and talented workers more. It is important that you pay well, according to the specific strengths of the individual to garner optimum results.

Knowing the Cons and Risks of Outsourcing

The current global financial crisis has put several jobs at stake, especially in first world countries like the United States and United Kingdom. Most huge and small scale companies have recently been preferring talents coming from smaller nations who do not require very high pay checks.

At times, people from remote sources may even offer better skills and experience than those who have been working full time with the company. The present recession in the United States has slashed hundreds of thousands of jobs, leaving most employees homeless.

Outsourcing has the disadvantage of not allowing bosses to fully monitor the activities of employees, primarily due to location. They are limiting their scope of observation based on the own efforts of managers assigned in the same remote region.

Assessment of potential workers are limited as well, as bosses can only conduct online interviews or provide short tests to determine or guess the efficiency of workers.

Preventing Pitfalls

Dishonesty can occur, since the system of management is not entirely hands-on. Business is conducted over thousands of miles, wherein a single dishonest manager can manipulate how other workers or a certain division is run.

Business owners need to be more careful about the sales and financial status of the company to prevent losses. In some cases, losses may be unavoidable. Although you get to save costs in labor and manpower, more expenses may be needed for checks and maintenance.

Every company needs to consider the pros and cons of outsourcing first before deciding on a particular function. The choice may lead to better results and lower expenses if done correctly, or poorer outcomes at higher rates.

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