The Pros and Cons of Outsourcing
Outsourcing is the process of hiring an outside company to perform services that are usually performed in-house.
It started in the ’80s and became more popular in the ‘90s and has become a part of many business strategies practiced today.
Outsourcing can refer to sending work overseas or within your country. I’m not going to focus on keeping jobs in the country or not (you can find this discussion in the resources section of this page.)
I would rather focus on how outsourcing can benefit your business as well as the issues that arise when you outsource.
1. You Can Work Around the Clock
When you outsource, especially when you are in different time zones, your work can continue around the clock; another party can work as you sleep. This speeds up what you can accomplish in the time you have available without the need to add extra shifts and staff.
2. You Can Reduce Overhead Cost
Overhead costs needed to run a business can be reduced. As a simple example, suppose you run a news-related website, and you hire a writer.
In addition to your writer’s wages, you need to provide a computer, desk, chair, phone, office supplies, etc. All these are overhead costs. When you outsource, you cut these costs because you pay a flat rate.
3. Savings on Taxes, Insurance, and Benefits
When you outsource, you don’t pay any of the costs related to payroll tax, unemployment insurance, insurance premiums, or benefits packages; you pay these expenses when you have a full-time employee.
4. Free Up Your Time
When you outsource, you give instructions, specifications, etc., and you should get the results you asked for. You don’t need to be bothered with any of the fine details or with project management.
You can move on to other issues that are important in your business. How much more could you accomplish if you outsourced 3–4 of your most time-consuming tasks?
5. Get Expertise Without The In-House Costs
IT services require an expert to deal with many of the computer and network problems faced by small businesses.
If you were to hire an in-house specialist, you might not have enough work to keep him or her busy, and the cost may not be worth it. Outsourcing IT services will get you expert help and advice without the added costs.
6. You Can Simplify Project Management
When you outsource projects, you reduce the need for management. For example, let’s say you run an assembly line for a product.
If you were to make each part required to assemble the final product, you would need multiple lines and machines, and you would need employees, managers, and supervisors.
If you were to outsource the process of manufacturing those parts, you would simplify the entire process and could focus on the final assembly.
7. You Lose Some Control
When you’re involved with internal projects, you have full control. When you outsource, you give the specifications and wait for the result, at which point it may or may not be what you expected. When you’re doing the work in-house, you can make changes and tweaks as needed and as you see fit.
8. There are Security Risks
For example, if you are developing a top-secret product and outsource the production of that product, you may run the risk of your producer leaking some details.
For example, an employee could be fascinated with the idea and talk to some friends about it. One of those friends mentioned it to their friend, and that friend happened to be part of the management of your competitor. So, even though the breach wasn’t intentional, it did get out. Anything to do with trade secrets should not be outsourced for security purposes.
9. Quality of Work
When you work in-house, you have control over the quality of work. When you outsource, the quality may not be there, and you may need to go through a few different providers to find the quality, and you will need to keep up the level of standard.
Another consideration is some providers don’t dedicate staff to your order. They may have hundreds of employees, and your order may be processed by someone different each time, and the product may vary in quality from order to order.
10. Missed Deadlines
Sometimes you have deadlines, and some providers may not prioritize your work as needed. They may have a bigger client that is their number one priority, or their work ethic may not be as strict as yours, and this is where critical issues can hurt if you outsource them.
11. Things Get Lost in Translation
Not all your providers may be fluent in your language, and a lot of the instructions may get lost in translation. This is a big problem because even with clear instructions, you may not always get what you asked for, and this is one of the downfalls of outsourcing.
You’ll find more issues to consider in the following resource section that I’m sure you’ll want to spend some time on.