Outsourcing is a term broadened with the economic and financial crisis of 2008. Cost saving became a big issue for many companies. Outsourcing could be defined as “the practice of hiring a party outside a company to perform services and create goods that were traditionally performed by the company”. The creation of a company requires a lot of expertise from different fields. Some of the departments within a company are not directly linked to the main production activity of the company, these departments could be the IT department, the accountant department or the human resource one. With the crises it becomes harder to afford the cost of having all these departments. The smaller the companies are, the bigger are the needs to manage personnel costs. This is where outsourcing some of the activities become interesting for the companies.
- Reducing Operational costs
Outsourcing is a business strategy that aims to reduce the operating cost. It is a subject of controversy as it is considered dangerous for domestic jobs. On the other hand it is a cost-cutting measure undertaken by many companies as the cost of producing the same product or service varies from one country to another. Outsourcing some services or products will help companies make big savings on certain costs that could be used to invest in better things.
- Improving efficiency
By employing the outsourcing strategy, companies can improve efficiency by outsourcing the tasks that are time-consuming and not related to the main activities and expertise of the company. The companies employed to perform these tasks can do it better because they are specialized in it, it also means they know how to do it better and faster which results in offering their services at lower prices.
- Accessing to a larger group of experts worldwide
Most of the time the tasks are outsourced to other companies that are specialized in the field. The company employed to perform the tasks possesses technical expertise and equipment required to accomplish the tasks faster and with better quality output.
Although outsourcing may be a solution to many companies, it is not without risks. The risks confronted by the companies when outsourcing are :
- Exposing confidential data
When a company chooses to outsource a part of their activity, they are facing the exposure of their confidential data to a third party. These data are facing the risks of being stolen or sold to unwanted parties if the choice of the outsourcing was not done thoroughly.
- Choosing the wrong partner
As mentioned in the previous paragraph, the choice of partner is very important as it is not only a matter of exposing your data, it is also about the delivered output. A company outsources their services or productions in order to reduce their costs and receive a better quality service or product. Associating with the wrong partner may cause the company to lose more money than executing the tasks on their own and wasting their time on fixing the problem.
Outsourcing could be really interesting for businesses in many ways. But before considering outsourcing your services or productions, please make sure to fully understand the association you are entrusting your tasks with.