As we know, outsourcing is a
process of contracting another company or a person to do a particular function.
Usually, the function being outsourced is considered non-core to the business.
Outside firms that are providing the outsourcing services are third-party
providers, or commonly called, service providers.
Although outsourcing has
disadvantages to your business like for example, we tend to loose the
managerial control. This happens because managing the outsourcing service
provider is much harder as compared to managing one's own employees.
Also, we usually tend to skip the
potential hidden costs of outsourcing which includes legal costs of putting
together contracts, and it feels that outsourcing reduces the overall expenses
of a business process. This is one of the major reasons why a lot of companies
decide to outsource or favor outsourcing.
It is hard to predict all the hidden
and missed out costs of outsourcing, causing overall costs to be
underestimated. Also, outsourcing proves that it is a threat to the security and
confidentiality issues of a company.
If the company is outsourcing a
business process such as payroll, confidential information such as trade
secrets will be known to the outsourcing service provider. Therefore, we should
be very careful in choosing which business to outsource and which not to.
Outsourcing also may result to the
possible loss of flexibility in reacting to changing business conditions, lack
of internal and external customer focus and sharing cost savings, as well as,
loss of internally produced talent is another problem associated with the
outsourcing as it may slow down the growth of an employee by depriving him/her
from the experience he/she would have gained by handling the business issue
himself, then by passing it over to some other external party.
Outsourcing success depends on
three factors, in all cases:
- Executive-level support in the client organization for
the outsourcing mission; plenty of communication to affected employees;
and the client's ability to manage its service providers.
- Outsourcing professionals in charge of the work on
both the client and provider sides need a combination of skills in such
areas as negotiation, communication, project management, the ability to
understand the terms and conditions of the contracts and service level
agreements.
- Above all, the willingness to be flexible as business
needs change.
For a conclusion, before a
company decides to outsource its business process, make it sure that you must
examine first all the factors carefully so that it does not happen that
outsourcing becomes a reason for companies to regret in the future.
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