One of the most misunderstood business strategies is the concept of outsourcing. Over the past decade, the practice has attracted a negative reputation, with some employees looking at it as a threat to their job security. In an actual sense, however, outsourcing does not have to be a negative thing.
It is often used as an effective way to help companies to grow while minimizing costs and guarantees top-notch services and products. The most important thing in outsourcing is to understand the most important elements. In this article, we cover the tenets of strategic outsourcing, including when and why to adopt this tactic.
Why Should a Company Embrace Outsourcing?
The most common objective shared by all businesses is the need for growth. As your venture grows during its nascent years, the question that often emerges is whether to perform all operations or outsource some of them. The concept of outsourcing is defined as the strategic use of external resources to complete tasks that would have been traditionally performed internally by staff.
There are many reasons a company can decide to outsource, including:
- Lowering the cost of operation;
- Improving the focus of your business;
- Making sure that all internal resources are allocated to core functions.
Before you decide whether to outsource some of your business functions, make sure that all the functions performed in-house actually add value to the venture. Those that you choose to outsource should only be those that cannot be completed in-house. This means that, before deciding to outsource, you ought to conduct some research.
Before you outsource customer service, start by clarifying your company goals. Also, ensure that you have a clear plan for the venture and a clear choice of the people you wish to outsource to. Most importantly, have a plan of how you will maintain communication with your contractors and create clearly articulated contracts.
Is Outsourcing Always the Practical Option?
Of course, there are some situations when it will make sense to perform certain tasks in-house. Outsourcing, however, means more efficiency. According to research, managing numerous tasks simultaneously instead of outsourcing can result in a drop in productivity by more than forty percent.
In other words, outsourcing can result in greater efficiency and improved productivity. It does not mean that you will be giving up control of your business. By allowing companies that specialize in specific sectors to do some tasks for you, you get greater productivity. For instance, you could outsource a function such as content marketing can improve awareness in leading to greater growth.
Another benefit of outsourcing some functions is that you get to some serious operational issues. When you let specialists handle non-core tasks, your company will be able to focus on its core operations. Furthermore, the strategy allows you to search for and engage the most talented employees without being limited by geographical or time constraints.
The most common reason to outsource some company functions is to save on costs of operation. In the process, however, you get to benefit in terms of greater flexibility and amazing innovation. This way, you can access amazing ideas that will support the growth of your business. Also, the strategy allows you to look for useful partnerships with leaders in various fields, creating a critical competitive edge for your company.
Drawbacks of Outsourcing
Although there are numerous benefits associated with outsourcing, it does not always reap the desired outcomes. One challenge that is often associated with this practice is quality control. According to studies, when businesses don’t employ workers in-house, it becomes challenging to control the quality delivered. That said, it ought to be reiterated that teams have been formed with more efficiency and ability to communicate remotely, meaning that companies can still control the quality of output.
Another challenge often associated with outsourcing is that it tends to make companies inflexible. In other words, changes you make to your business plan or model have to be relayed to all the outsourced employees. In some instances, there may even be a need to retrain the outsourced employees so as to familiarize them with the changes.
Cases have also been reported where outsourced functions have failed to meet expectations. For instance, you may realize that these external workers have a different level of ethos or commitment when compared to in-house employees. The most alarming challenge, however, remains the fact that there has been recent wage inflation in most outsourcing markets. This has played an immense role in reducing the attraction of outsourcing as a business strategy.
Please understand that like is the case with every business strategy, outsourcing has its benefits and challenges. However, as long as you avoid the major mistakes and approach the process based on research, outsourcing can be indeed an amazing tool that spurs your business growth.
What Business Functions Can Be Outsourced?
Understand that running a successful business is a challenging undertaking. When you choose the appropriate outsourcing plan, you can strike a perfect balance in efficiency and productivity. Here are some commonly outsourced business functions:
- Information technology;
- Call centers for customer support;
- Accounting services;
- Marketing functions;
- Human resource management;
- Data entry.
Outsourcing presents numerous benefits, although some challenges exist. The success of your strategy will depend, to a large extent, on the tasks you choose to outsource. Do your research and make sure that you understand how your business operates.
What About Control and Process Understanding?
One of the most cited limitations of outsourcing is linked to the fear that the organization may lose control. However, this does not have to be the case. When transferring a process or product, you ought to ensure that you have a good understanding of the process. Also, work on communication, offering concise, comprehensive, and clear specifications in terms of expected outcomes.
The most important thing is to think about outsourcing as a possible long-term partnership intended to support your business’s growth. Also, work on sustaining the relationship between your business and the external employees. Effective communication, coupled with continuous risk assessment, should be at the heart of the outsourcing partnership.
Interesting related article: “What is Outsourcing?”