The Pros and Cons of Outsourcing: Does Outsourcing Make Sense for Your Company?

world map over personThinking about outsourcing this year?

Did you know that in 2017, the global market size of outsourced services was worth over $88.9 billion? It’s a common practice for North American and European countries.

Why then has the industry shown such extreme fluctuation over the last six years? The industry was worth over $104.6 billion at its high. It soon dropped to 76.9 billion.

Why the unrest?

The shifting, economic currents force businesses to scrutinize the pros and cons of outsourcing. With less capital and our country’s trend toward keeping jobs at home, the decision for business owners grows more challenging each year.

Below we’ll outline the benefits and drawbacks of outsourcing so that you can decide the best option for yourself. Read on.

Advantages

This section describes the many benefits you’ll receive by outsourcing. So, if you have been putting off outsourcing, these can help you rethink about it.

Rapid Scaling

To stay competitive in today’s economy, businesses must remain fluid. Scaling up when a surge of business occurs is essential to growth. Scaling down, without firing hired employees, can save your company’s reputation.

When you outsource, you have that kind of power. When you pay another company for the use of its employees, it’s like hiring a temp agency. You can hire a temporary employee or let one go on a moment’s notice without the usual hassles.

Free Technology

Let’s use an example for this one. Imagine for a moment that you outsourced your telephone answering services to alldayPA. You now have access to their workforce, three contact call centers, and $15M worth of technology.

Those are significant numbers for a small business that wouldn’t otherwise have access to that kind of tech.

Cash Flow

One of the benefits of outsourcing is your ability to set your pay scale below that of your area. You can get the work you need to be done for less money. You don’t have to pay for employee training or benefits.

This frees up cash, which is especially important for start-ups.

Frees Management

Redirect any low-value assignments away from your management. It’s a waste of resources. Those managerial positions exist to assure your company’s direction and growth.

Keep those positions operating from a ten-thousand-foot view. Focus on high-value assignments to boost your company’s revenue and maintain its trajectory.

Delivery Time

This one’s a double-edged sword. Outsourcing jobs produce rapid returns…until they don’t.

When you outsource a job, you have the convenience of temporary employees working on your project. They don’t need breaks, time off, or weekends. Jobs get done overnight.

Unfortunately, you also have no oversight. We’ll talk about this more in the “4x Rule” section.

Larger Talent Pool

Employees in small businesses often handle more than one role. An employee might not specialize in any field, but instead be a jack of all trades.

Small businesses now have access to employees with specialized skills, like those at IT outsourcing companies. Those employees specialize in areas which their team is deficient.

Disadvantages

This section describes the many drawbacks of outsourcing. You can consider them when making your decision. This is important to you pick the right company to outsource to.

Privacy and IP

Intellectual property (IP) and privacy laws exist in most first world countries. They are typically understood and respected by traditional employees.

If they’re not, you’re in a position of oversight. You can take immediate action.

Not so with outsourced, temporary employees. These strangers have access to all your intellectual property. They can do what they like without repercussions.

If you want to learn more, check out our article on intellectual property and outsourcing.

Gambling

Simply put, you never know what you’re going to get. When you measure outsourcing pros and cons, throw this at the top of the list.

You are hiring a company. That company, in turn, hires its employees. You have neither any control over who they hire nor who they task with your job.

A fantastic worker may finish a quarter of your project. A useless worker completes the other three. It’s a toss-up. We recommend avoiding inexpensive outsourcing companies for critical tasks.

Either keep those in-house or hire someone who has as much as stake in your success as you.

Labor and Environment

Labor laws and environmental standards change from country to country. If you choose to offshore (outsource out of your country), then you could face blowback.

Consider for a moment, outsourced the production of your material goods. It’s unlikely your products will meet the environmental standards of your country.

You may also be supporting unhealthy working conditions. Think sixteen-hour workdays, hazardous environments, and child sweat-shops.

4x Rule

Initial quotes from outsourcing companies often miss the mark. Nowhere is this more clear than the “projected completion date.” Missing this date is such a common occurrence that it’s become a rule.

Companies promise a quick turn around on projects. Sometimes it happens. Sometimes not.

If you depend on the project taking four times longer than projected, you’ll never be disappointed.

Lack of Control

Once you outsource a project, it’s out of your hands. You have no say in who works on the project. You cannot train the workers.

You have little say in quality control or labor distribution. The company you work with has no obligation for transparency. It’s a roll of the dice.

Public Opinion

Unions and customers typically frown upon outsourcing to another country. It means a loss of jobs for your country. Some businesses try to cover this up by becoming less transparent.

Those businesses face the noose when the public find out. (Can you say sweatshops?)

Communication

Failures are compounded by breakdowns in communication. When you consider the advantages and disadvantages of outsourcing, this is another one you should weigh heavily.

When you outsource, plan for issues with time zones, response times, and language barriers. They happen regularly and can be a significant point of frustration.

Our advice? Count on them happening and plan accordingly.

Weighing the Pros and Cons of Outsourcing

Well, have you made your decision? Is outsourcing the way to go? Or is it to be avoided at all costs?

If you decided you’re on board, then it’s time to research how to get the most out of it. Please take a few minutes to read our article on how to use outsourcing for growth in your business. It’ll give you greater insight into where your new tool will benefit you best.

If you evaluated the pros and cons of outsourcing and decided against it, consider other options. Do you have other methods to increase sales or decrease costs? Adjust your reading glasses and peruse our article on ways to cut business costs in 2018.

Remember, there’s no time like the present. Choose whichever article matches your decision and dive in.

So long and good luck!

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