Outsourcing is the distribution of specific business operations to a specialized external service provider. Most often an organization cannot handle all sectors of a business process internally. Additionally some activities are temporary and the organization does not intend to employ in-house professionals to perform these activities. The most commonly outsourced streams of business include: information technology outsourcing, legal outsourcing, marketing outsourcing, customer service outsourcing, Content Development, Web Design & Maintenance, logistics and manufacturing.
The system of distributing specific business and office tasks to outside vendors and companies is fast becoming the norm. Anything from IT services, manufacturing, legal and bookkeeping services, customer support, and logistics are usually relegated to outside workers.
The changing perception of business offices goes beyond the office walls. With the ability of the internet, advanced communications platforms and programs, and advances in technological gadgets, it is now possible to communicate, share, and send presentations, documents, databanks, and projects from anyplace around the globe, as if you are in the same location.
Once the job is outsourced to the service provider, he will take the responsibility of performing the tasks and maintaining the organization’s assets.
Nevertheless, prior to outsourcing any aspect of your business to a third-party vendor, it is necessary to understand the disadvantages of outsourcing. Even though outsourcing presents a range of benefits to your business, it could also cause difficulties if not outsourced to the appropriate service provider.
Why do organizations outsource their business process?
The prime factors which have led to a growing pattern of small business outsourcing are
- expert-labor deficit in some sectors of the business process
- presence of cheaper labor, whilst not comprising on the quality of output
- feasibility and ability to focus on the other pertinent business process
These factors have particularly contributed to most of the outsourced partners across different localities in the world. Technical expertise, expertise in communication capabilities, and suitable financial packages are the most important benefits of outsourcing to India.
General disadvantages of small business outsourcing
Outsourcing also has its disadvantages. One of the disadvantages is that some jobs are not fit to be outsourced. You might be able to find business solutions to some of your demands, but for the some others, you have to keep the work within the company. Here are some disadvantages with outsourcing small business processes;
- Risk of exposing confidential information: When an organization outsources Payroll , HR, and Recruitment services, it presents a risk if it involves revealing confidential company data to a third-party
- Synchronizing the deliverables: In case you do not choose an appropriate partner for outsourcing, some of the common trouble areas include sub-standard quality output, extended delivery time frames, and inappropriate classification of responsibilities. Sometimes it is easier to control these factors within an organization rather than with an outsourced partner
- Hidden costs: even though outsourcing most of the times is cost-effective, sometimes there are hidden costs involved in signing a contract as well as the fact that signing a contract across international boundaries may pose a serious threat
- Lack of customer focus: An outsourced vendor may be taking care of the expertise-demands of several organizations at a time. In such cases, vendors may lack absolute focus on your organization’s tasks
With all these disadvantages of outsourcing to be considered before actually approaching a service provider, it is usually advisable to specifically ascertain the importance of the activities which are to be outsourced. It is always helpful for an organization to consider the pros and cons of off shoring before actually outsourcing it.
To get the best of business outsourcing, you first need to determine the business operations and tasks that are appropriate for outsourcing. Secondly, you have to know how to arrange your work with several vendors. Third, it is important to know how to properly screen vendors.
Disadvantages of customer service outsourcing
There’s nothing more frustrating as a client talking to a customer service representative that clearly has no understanding of your trouble or the agency to solve it. This can lead to a few disadvantages of customer service outsourcing if it’s not properly handled. For instance, an outsourced customer service representative:
Will Initially Require Training:
When you start outsourcing your customer service you’ll need to train your new assistant. She will need to comprehend the ups and downs of your product or service so she can intelligently assist your customers with their requests.
May Not Be Able to Fix the Problem:
An outsourced customer service representative will preferably handling basic support inquiries.
When it comes to complex problems or technical issues your outsourced customer service rep will need to pass the ticket to someone who can resolve the issue internally.
The Disadvantages of marketing outsourcing
Risk of cost
Implementing marketing outsourcing can be expensive if the approach is uncoordinated and sporadic. Failure to invest time in proper planning will lead to stop-start bursts of activity - causing a far greater cumulative cost than an effectively maintained strategy.
Risk of inconsistency
Another risk coupled with failing to plan initially is ending up with marketing yields that doesn’t properly reflect the identity or needs of your company. Working closely with a good marketing vendor should foster your marketing strategy with a process that is repeatable, appropriate, and transparent.
Disadvantages of information technology outsourcing
Information technology outsourcing decreases or completely obliterates direct communication between clients and organizations. Limited communication hinders the relationship building process, which may lead to the overall unhappiness of the client and organization. The outsourcing organization loses total control over all sectors of the company. Project implementation time frames may suffer as a result. If the organization terminates the contract with the outsourced entity, sensitive, confidential information becomes jeopardized.