Outsourcing - the pros and cons

Pros and cons
Pros and cons

Outsourcing is the practice of hiring a third party to provide a service that for whatever reason a company is not able or not willing to provide in house. If managed correctly it can be an incredibly advantageous tool, especially for small businesses. Letitia Booty takes a look at the pros and cons.

Pros:

• It’s cheaper – not only can you outsource to areas/countries where salary expectations are lower, outsourcing often means lower operating costs. Whereas you have to run a computer and heat a workspace for your employees, once the service is outsourced this is no longer your cost to bear

• Expertise and know-how – sometimes, it is a good idea to outsource processes that you do not have the expertise to do yourself. For example, many SMEs hire an accountant to deal with their finances, because this is a complex undertaking

• It frees up management time – SME owners by the very nature of the job end up wearing a lot of hats, and by outsourcing some business processes you can free up more time to focus on your core business

• Quality of service – this point is related to ‘expertise’. In theory, by outsourcing to experts you’re securing a better quality of service – just remember to do your research

• Access to better technology – for many small businesses it may seem extravagant to keep up to date with the latest tech, but any large outsourcing company will be able to afford this and you will see the benefit

Cons:

• Loss of control – when running a small business you may be used to having the final say on everything and handing over some of your power could be a wrench

• Quality/turnaround time – outsourcing scandals making a splash in the headlines are ten a penny, and it’s often a case of the contract not performing as well as expected. Make sure you know your KPIs and make it clear from the start what you’re expecting

• Language barriers – if you offshore business processes you can encounter language barriers. This is manageable, but be careful if you are offshoring services such as call centres – if a client calls with a query and has difficulties with a language barrier it could lead to an irate customer base

• Security issues – it goes without saying that guarding against cyber-attacks should be a huge priority in the modern world, but it is that much harder to control your data when it is in someone else’s hands