In today’s chaotic business environment, corporations are struggling to handle every single job function in-house. For this reason, outsourcing has become a common practice in business, and this area has been growing rapidly.
What is outsourcing?
Outsourcing is the practice of assigning particular job functions outside of the business instead of doing them in house.
What are the benefits of outsourcing?
- Improve efficiency and cut down on costs. By outsourcing some of the business job functions to specialized suppliers, you are allowing more experienced professionals to handle something for you. This often leads to reduced costs since work processes are accomplished more efficiently.
- Refocus your time and resources on your core activities. Often supporting activities such as back-office takes up a lot of your time, effort and resources, which in turn might cause you to lose your focus from your core business activities. By outsourcing supporting processes, you can then refocus back to your core activities.
- Suitable for dynamic, seasonal demand. It’s not unusual for many businesses to experience cyclical demand depending on seasonality or even due to unexpected events. If you are outsourcing, then you have greater flexibility adjusting the amount of workforce required to get the job done. At the same time, you are also cutting down unnecessary costs.
What are the risks involved?
Although outsourcing may yield many benefits to your organization, it still carries some risk. Let’s have look at the most common hazards so you can protect your organization from any harm:
- Loss of Control. One of the most frequent risks associated with outsourcing is the loss of control. By giving out some of your job functions and work processes to a third-party, you are simultaneously losing some control over the quality and production timings. To avoid this, it is important that you keep a close eye on the outsourced activities while also maintaining a close relationship with your outsourcer.
- Failure of the outsourcing company to complete your project successfully and on time. In order to mitigate this risk, you will need to spend considerable time researching and evaluating your potential outsourcing options. Make sure that you weigh everything down, including the company size, previous experience, area of specialization, case studies if available, and even their social media and website activity. Remember that you should be basing this cooperation on mutual trust, credibility, and accountability.
- Hidden costs. Another major risk that is often seen in outsourcing scenarios is the risk of having hidden costs appearing outside of your contract obligations. In order to avoid this from happening, pay attention to your signed contract and have it checked by a legal consultant. Also, make sure that you define all the project requirements and that the cost estimate they have provided satisfies every single requirement on the list.
- Confidentiality. Lastly, when hiring an outsourcing company it is important that all your information remains confidential and that intellectual property and personal data are stored securely and confidentially. Make sure that you are choosing a partner that ticks all these requirements.