Business outsourcing has been streamlined and simplified by modern technology and cloud computing.
These technologies and IT security protocols have made outsourcing options a real opportunity for business leaders to save money, increase profits, and improve operations. There are, however, some drawbacks to consider. Be sure to consider all pros and cons as well as a few best practices for professional outsourcing when considering outsourcing options for your company.
How Does Professional Outsourcing Work?
By outsourcing, a company or organization shifts certain operations to third-party providers (other firms, companies, contractors, or other external resources).
Pros and Cons of Business Outsourcing in 2023
The quality of the outsourced service providers with whom you partner determines whether your business benefits or suffers as a result of outsourcing.
Outsourcing has the following advantages and disadvantages:
Pros of Outsourcing
1. Reduce your expenses
Professional service providers are almost always less expensive than hiring in-house employees to complete the same tasks. Small and medium-sized businesses are particularly affected by this.
2. Save time and reduce workload
You and your employees save time when you outsource business functions. Your employees will be able to handle much less work in-house as a result. By outsourcing repetitive or frustrating tasks at work, you can streamline your workflow, reduce employee burnout risk, and increase employee satisfaction.
3. Expertise from industry experts
Outsourcing non-core business functions gives you access to professionals and experts in those fields. It is more than just accessing the level of expertise that your small or medium-sized business can afford to hire if you choose to outsource your back office functions, marketing, legal, or other departments. You’ll receive services from some of the top talent in those fields.
4. Prioritize high-value tasks and/or core business functions
Your business’s success, development, revenue, profits, and growth will be enhanced when you and your employees don’t waste time worrying about non-core tasks.
5. Managing risks
By outsourcing certain functions of your business to reputable third parties, you shift the burden of risk to them. Depending on the type of outsourcing you choose, this includes internal fraud, IT security, and physical security risks.
6. Boost productivity
You can increase productivity by outsourcing because you and your employees will be able to focus on your primary operations and goals.
Outsourcing logistics planning is another option, as interruptions in your supply chain can halt productivity. By meeting customer demands, successful logistic planning in businesses results in lower costs and greater revenue. Your long-term goals can be achieved by increasing productivity.
Cons of Outsourcing
1. The loss of control
Outsourcing any function of your business means that you lose some control over it. Choosing a third-party provider that will work with you to develop systems that integrate well with the rest of your company’s operations is important, but you are still relinquishing control.
2. Risks related to security and confidentiality
Outsourcing shifts the risk and security burden to a third-party provider, but you still need to choose one with a solid reputation and sound policies, protocols, and infrastructure. If you choose a third-party provider that is not truly trustworthy, you may risk the security, confidentiality, and/or reputation of your business, clients, and private information.
3. Delivery delay
With outsourced services, you run the risk of experiencing operational snags due to delayed service delivery, regardless of what you choose to outsource. By working with a highly reputable outsourced service provider, this disadvantage can be mitigated.
4. Costs that are not disclosed
Be sure you are aware of all the potential costs and fees involved with outsourcing any function of your business. You should understand how much you will be paying, what services you’ll be receiving in return, the limits of any services, and the fees (if any) associated with exceeding your maximum contract usage.
5. Concerns about quality
Outsourcing internal functions ensures that the tasks will be completed better than they would be on your own or in-house. It is possible to experience quality issues, however, if you do not choose a high-quality provider or do not closely monitor the service.
Best Practices in Outsourcing
Consider these five best practices for business outsourcing to maximize the advantages and minimize the risks of outsourcing.
1. Focus on Non-Core Business Functions
To preserve your company’s unique value proposition, it’s probably best to keep the majority of your core business functions in-house. You can improve your business operations, save money, and save time by outsourcing non-core aspects of your business, such as bookkeeping and accounting, legal, compliance, and auditing, marketing, logistics, and shipping, and human resources.
These non-core business functions are likely necessary for your operation, but they do not constitute a crucial, core function. When your business is not large enough to require these types of services 24/7, hiring these types of experts in-house can be quite costly. You can access some of the best people in these fields by outsourcing these functions at a fraction of the cost of hiring them directly. Consequently, your business costs are reduced and service quality is increased.
2. Choose a Reputable Provider
Make sure you thoroughly research your options before choosing a B2B outsourcing provider. Offshoring differs from outsourcing in that it involves outsourcing to overseas companies. Businesses in these countries may be subject to different regulations and laws than those in the United States. Make sure you research the companies you use thoroughly to make sure they are reputable, secure, and ethical.
3. Take security seriously
Aside from reading the privacy policies of outsourced service providers carefully, you should also inquire about their security protocols. Check their IT security and physical security measures and make sure they meet your requirements.
When working with an outsourced provider, the financial burden of security and risks are usually transferred to them. However, there is still a risk to your business’s reputation. Your company’s reputation can still be damaged if one of your outsourced providers experiences a security breach.
4. Become familiar with privacy policies
Make sure you read the privacy policies of any third-party service provider you work with. Your company’s and your clients’ sensitive information could be at risk if their privacy policies are not sound.
5. Calculate ROI by understanding the costs
Get service cost quotes in writing from the outsource providers you choose to work with, and make sure you read them carefully. In this way, you can avoid unexpected fees that can quickly add up in a partnership.
Be sure to keep track of all outsourcing costs and any savings you might achieve by outsourcing, as well as any revenue you may gain by outsourcing. It can help you determine which functions of your business are the most profitable to outsource.
These five best practices will help you maximize the positive outcomes of outsourcing for your company, allowing you to save money, time, and resources while leveraging industry expertise that can supercharge your non-core departments.
If you follow them when deciding which functions to outsource and shopping for professional outsourcing services, you will be able to maximize the positive outcomes of outsourcing for your company. Thus, you will be able to maximize the opportunities professional outsourcing offers while minimizing the potential drawbacks and risks.
Let us help you find top talents in IT, technical support, digital marketing, and cloud services so you can leverage all the benefits of outsourcing in the new normal. Request a FREE copy of the e-book on Third Wave Outsourcing .