Outsourcing is when a business contracts a third party service provider for a specific process, instead of performing it in-house. There are many areas of business that are outsourced such as IT services, customer support, backend services, financial services, technical support, accountant services, consultancy services, etcetera. In this age of globalization, the question of business outsourcing is inevitable and hence it becomes pertinent to know the goods and bads of outsourcing.
1. Cost Savings – Isn’t this the most obvious? When it comes to labour costs and operation costs, India is one of the most economical outsourcing destinations. When a business decides to outsource a process to India, it saves substantial costs. Business process outsourcing stands cheaper than procuring resources, technology and infrastructure to perform it in-house.
2. Expert Labor – But it’s not just cheaper labour that drives businesses to outsource. At times, companies look for specialized labor to perform a specific niche operation for them.
3. Focus on Core Domains – More often than not, businesses outsource supporting processes rather than core processes. This allows the company to focus on its core activities such as sales and marketing.
4. Increased Adaptability – In today’s dynamic business environment, adapting to changes is crucial to survive. Outsourcing helps an organization to adapt to the fast changing needs of the industry.
5. Widening Business Scope – Needless to say, outsourcing broadens the business and helps it to capture a wider customer base by putting their foot in diverse domains. It enables a business to achieve backward and forward integration, giving it an edge over its competitors.
6. Risk Mitigation – When a business outsources some of its processes to a service provider, the latter shares the responsibilities and thus the risks involved in the process.
1. Data Vulnerability – By opting for off-shore outsourcing, a business puts your sensitive data vulnerable to being lost or misused.
2. Linguistic Differences – Many businesses outsource customer care calls to an off-shore destination. It becomes concerning when the foreign location has a different first language as it might affect the quality of handling calls.
3. Less Control – Though remote operations are getting more robust with the advent of new technology. But still, due to different cultures, time zones and work philosophies, outsourcing comes with some limitations on how the operations are controlled and monitored.
4. Compromise on Quality – If the service provider is not abreast with the nuances of the business process or does not have a clear understanding of the technology to be deployed; it can lead to a compromise in the quality of the operation.
5. Legal Costs – When two companies sign an outsourcing contract, it incurs hefty paperwork, hidden fees and legal costs.
Apparently, the positive aspects of outsourcing outweigh its negative aspects. Done right, it can help the organization streamline business processes, improve operational efficiency, enhance its potential to deliver, increase productivity, and improve the overall quality of the operations by taking specialized services of the provider. Top notch companies have like Google, Accenture, Microsoft and many more are reaping the benefits of outsourcing their business processes to India. However, there are pitfalls to avoid. It is very crucial to choose the right service provider and even more importantly to make sure, that the decision to outsource is in sync with the organization’s goals and objectives.