Outsourcing is when a business hires the services of a third party to carry out the functions that are not core to their business. Businesses hire an outside agency or an individual to perform certain functions. When a company decides to outsource, they’re usually filling a gap in their workforce or taking advantage of lower costs for specialized services offered by third parties.
By outsourcing, the person or the business can allocate its resources where they are most valuable and effective. Tasks that are usually done internally are contracted out to outside vendors and operational activities to one or more independent outside firms. This could be services such as admin services, technology services, and more.
Types of Operations
BPO providers are hired by businesses for two key reasons:
- Back Office Operations: Payment processing, information technology services, quality assurance, and other back-office functions are examples.
- Front Office Operations: Marketing, sales, customer service, and grievance resolution are all examples of front-office operations.
While outsourcing business tasks can be a huge relief and a viable solution to cut costs, some of the issues faced during the process are as follows;
1) Threat of Theft to Intellectual Property
There is a huge risk in outsourcing your business processes. Outsourcing the business process requires a great deal of trust especially for the big companies who have a lot to lose. Although you are not leaving your secrets at the other end, there are still so many things that you need to consider. The risks involved include money, patronage, confidentiality, and more.
When outsourcing, you take a huge leap of faith. All that knowledge and expertise that you’ve built up over years will now be used by another company. Do they have the capacity to keep your information safe? You hope so, but there is always doubt. It’s important to find a partner who has the skills to take care of your sensitive information.
2) Difficult to Source Compatible Resources
Finding and keeping the right people on your team is hard in this day and age. Organizations are finding it increasingly difficult to find capable senior managers who fit their corporate culture. This is because of a large attrition rate due to increasing competition within companies, global expansion, and other factors. At the same time, they have a lot of line managers encountering juniors that they can’t use to execute their business strategies.
3) Communication Problems
Whenever you conduct a business deal with someone, communication is the key to whether you will make agreements or not. Communication can be a challenge at times because of the different accents, dialects, and distance of people in various places. Especially if you are outsourcing your business to service providers in a different region.
However, this can be tackled by providing clear-cut written instructions if the accent is difficult to understand.
4) Scams/Poor Services
If it is too good to be real, it probably is. It’s a simple heuristic or mental shortcut that could save a lot of headache and aggravation when trying to decide whether or not something — such as an outsourcing company quote — is too good to be true. Specifically, if you see an outsourcing company offering very low prices, understand they likely won’t be able to provide the kind of quality of work you desire.
One of the biggest time-wasters when outsourcing to a vendor is the amount of extra hours that are wasted by inefficient documentation. It is one of the most vital documents in your outsourcing process – but, many business owners don’t realize this until they find themselves in the middle of an outsourced project with months of extra costs and no end in sight.
6) Lacking Necessary Skills
Hiring workers who possess the exact skills set to hit your businesses’ goals is a must. If you choose to hire someone who lacks the required skills, you will be wasting precious resources down the drain. Also not hiring someone with the necessary skills can lead to delayed deadlines may cost you more in terms of time, money, and reputation.
Benefits of Business Outsourcing
1) Higher Efficiency
Today’s businesses cannot spare enough time or resources to deal with intricate details and tasks that comes their way. There are numerous chores that only an experienced business outsourcing agency can do. When you outsource to the right agency, you benefit from increased efficiency and productivity.
2) Lower Costs
Instead of purchasing extra computer systems and hiring more employees to do different tasks, you can outsource these tasks to a service provider, which reduces overhead costs.
3) Concentrate on the most important company operations.
The process of doing business involves a lot more than just the core functions. To reach your ultimate goal, you must have many different parts working together in coordination much like a machine. One part of the machine might be responsible for generating sales and another could be responsible for all customer service needs. By outsourcing these ancillary or support processes, you can spend less time and money on them, resulting in a higher return on your investment.
4) Expansion to other countries
Global expansion used to be a highly difficult and expensive task for organizations. The internet has made international market access more affordable for small and medium-scale service providers.
The world is getting smaller again. Globalization is becoming a reality. The internet has opened doors and traditional boundaries are disappearing. The need for multi-lingual and multi-cultural businesses is critical in an otherwise geographically limited market. The globalization of business outsourcing provides companies with an opportunity to extend their operational capabilities internationally and drives down costs in local markets.
There are quite a few challenges of business outsourcing but like all things, there are benefits as well and if you happen to choose the right service provider for the job, the benefits outweigh the challenges since it will enhance your business reputation, revenue and efficiency.