Outsourcing: Benefits and Risks
Updated: May 13
In the last three decades, the outsourcing industry around the world has been growing at a rapid rate. More and more businesses are outsourcing some part of their business process, in fact according to a recent survey, 33% of small businesses outsource some part of their operation while as much as 52% plans to do it in the future. If you are a business owner who also is interested to outsource and want to test the waters, you definitely want to know what outsourcing really is and what the risks and benefits are. And in this blog, these answers are exactly what I want to provide.
What is Outsourcing, Offshoring and Near-shoring?
Outsourcing is a process whereby a business delegates part of its operational process to a third party service provider. This is done to reduce business costs and have an entity that is more specialized in certain tasks handle them.
Offshoring is when you outsource your business processes to a third party service provider situated in another country, in a different part of the world. Say, how Google has hires programmers and developers from India and Philippines. Near-shoring, on the other hand is when you hire an outsourcing partner from a neighboring country.
What are the benefits and risks of outsourcing?
A discussion of the advantages and disadvantages of outsourcing is something that all businesses must consider to before making any decision to hire an outsourcing firm to delegate the tasks to. Generally speaking, benefits of outsourcing outweighs the risks by far. Here we discuss some of the key points in this regards.
The Benefits of outsourcing:
Getting Experts for the operational processes: Outsourcing companies are always specialized in the services they provide. Thus, they not only will have experienced people, but also the technological expertise to complete the tasks that you hire them for. Ultimately, you get better quality work and seldom have to worry about training them.
Swift delivery of results: Having experienced people assigned to your tasks mean they will ensure that your tasks are delivered on time without delay.
Re-focus on core business process: Outsourcing non-core part of your business means you now can focus on what really matters; core business operations that generates the revenue.
Sharing of Risks with the outsourcing partner: Since it is the outsourcing company's responsibility to ensure delivery of results, you are shifting some of the risks and responsibilities of your business to the outsourcing company. Since they are experts, they will be able to mitigate the risks associated with their given tasks in a better way.
Reduction of operational, overhead and recruitment costs: Because you are delegating part of your operational process to an outside entity, you do not have to invest in building infrastructure for that process yourself. This, along with outsourcing being cheaper comparatively, greater reduces your business costs.
The Risks of Outsourcing:
Possible loss of control: Delegating tasks to an outsourcing company may result in having less control of these processes.
Confidential Data having risks of exposure: Certain processes are very confidential in nature, such as information relating to insurance claim, medical records, accounting, etc. There is risk of exposure of such data if no tight security protocol is maintained by the outsourcing firm.
Issues in regards to quality and completing work on time: Sometimes hiring less reputable third party vendors can result in unwanted issues that are detrimental for the business.
Lack of personalized focus: Some substandard outsourcing vendors lack the ability to provide complete focus on your tasks while providing services to multiple clients.
Zayed Ahmed is the Founder and CEO of ASL BPO, a Business Process Outsourcing Firm that provides business solutions to companies world wide.