When you’re running a successful business, it’s impossible to do everything yourself. This may make you wonder whether you should consider outsourcing parts of your business to freelancers or other businesses.
Outsourcing has many advantages and disadvantages, from the new skills and opportunities it can bring to your business, to the relevant legislation you need to comply with. Weighing these factors will help you decide whether outsourcing is right for your business.
In this article, we’ll talk you through everything you need to know about outsourcing, so you can make the right choice for your business.
What is outsourcing?
Before discussing the pros and cons of outsourcing, it is important to understand what outsourcing is and why many businesses rely on the practice.
Outsourcing involves hiring freelancers, contractors or outside businesses to perform certain business functions or processes. It could be your HR, your marketing, your accounting or your copywriting.
While outsourcing isn’t right for every business, many organizations find that it helps them save costs and gain a competitive advantage. For example, many small businesses with only a few employees may not be able to justify bringing in a full-time employee to manage their HR needs, so outsourcing may be a more cost-effective solution.
However, it is important to know that outsourcing involves risks, and these need to be carefully weighed against the benefits in order to make the right decision for your business.
benefits of outsourcing
There are many benefits to outsourcing, which is why many businesses choose to outsource certain business functions or processes to external contractors. Let’s take a look at some of the main benefits of outsourcing.
1. Be More Efficient
If you do not have the skills within your business to perform a specific task, outsourcing can be an efficient alternative to hiring a full-time member of staff. This is because specialist contractors or outside companies play the role on a daily basis, so have expert knowledge of your field. This enables them to work efficiently while ensuring quality.
2. Reduce Cost
One of the biggest benefits of outsourcing is the potential cost savings. You will often find that outsourcing a business function, such as accounting or human resources, costs less than hiring a full-time employee for a role. Not only that, but you’ll only get paid for as much or less work as you need, so you’re not paying an employee for hours you don’t need. This means you can spend more money on other areas of your business.
3. Focus on What’s Really Important to Your Business
Let’s face it, business functions like accounting and human resources can deviate from your core business focus. By outsourcing these tasks, you can free up time to focus on what’s really important to your business, such as building your brand, developing new products or services, and making those all-important sales. Make
4. Gain a Competitive Advantage
Outsourcing can give you access to infrastructure, facilities and capabilities that you might not have access to otherwise. This can give you an advantage over your competitors, giving your business the best chance for success.
5. Increased Flexibility
When you outsource business functions, you enable your business to become more agile and flexible. It can help the business to adapt to the ever-changing market conditions to meet the challenges.
6. There is no need for infrastructure or technology
Some business functions require specific software, hardware, or equipment for you to perform the role effectively. When you outsource, the contractor is responsible for providing their own technology and infrastructure, which means the cost to your business is greatly reduced.
Disadvantages of Outsourcing
While there are many advantages to outsourcing certain business functions, there are also some disadvantages that you need to be aware of. These largely include the issue of handing over control of a particular business function to a third party and the risks that come with it.
To decide if this is the right move for your business, you need to carefully evaluate these against the benefits of outsourcing.
Let’s take a look at some of the major disadvantages of outsourcing.
1. Quality can be compromised
When it comes to running a successful business, quality is everything. If you rely on an outside contractor or company, you cannot always guarantee service delivery. Maybe the quality is lower than you expected, or that it was delivered ahead of time. It is important to set your expectations in the contract and to have service level agreements that are followed by the contractor.
2. Privacy and Security Issues
Outsourcing means handing over direct control of a business function to a third party. For some businesses, this may raise privacy or security issues. Before providing access to internal business information to a third party, it is important to consider whether a non-disclosure agreement is required. You should also ask the contractor to read and agree to any privacy, confidentiality and GDPR policies that you have in place.
3. Contractual Flexibility
While outsourcing is often promoted for its flexibility, it often depends on contractual terms. In some cases, you may find that the contract is too rigid to accommodate any changes, leaving you stuck with an agreement that no longer works for you. It is essential to make sure that your contract allows for flexibility if there is any chance that it may be required at a later date.
4. Lack of Stability
Depending on your contract, you may find that there is a lack of consistency when you outsource a business function. For example, if the contractor decides that they no longer want to work with your business, or if the third party company goes out of business, you may have a conflict.
5. Offshore Outsourcing
Many businesses choose to outsource specific business functions to offshore contractors because of the cost savings. However, it can bring new challenges, such as language barriers, different time zones, and cultural differences. Not only that, but you also need to consider whether they will have access to sensitive or confidential information and legal issues that may arise from this.
examples of outsourcing
Almost any aspect of your business can be outsourced to a third party, although core functions such as sales and product development are usually kept in-house. The most common business functions that are outsourced include:
- human resource While many companies have a dedicated human resources department, for small businesses with only a handful of employees, a full-time employee may not be required.
- Accounting & Payroll Accounting isn’t always easy, and it’s one area where you can’t afford to make mistakes. For small businesses that can’t justify hiring in-house, outsourcing accounting can be a good option.
- Marketing – Outsourcing marketing to an agency is a popular option for both small businesses and large corporations. This is because marketing agencies can provide specialist skills including SEO, digital marketing and design.
- IT support – For small businesses, it’s hard to justify a dedicated IT support team in-house. Outsourcing is a cost-effective option that is chosen by many businesses.
- Shipping & Logistics – Unless you only serve local customers or have a fleet of vans at your disposal, it makes sense to outsource your shipping and logistics. Whether you opt for a well-known national delivery company or a smaller local courier service, it is a popular choice for many businesses, large and small.
- research – It is important that you stay updated with market trends or you risk falling behind. If you do not have in-house resources, you may choose to outsource this research to an outside company.
- website building Not having a website is not an option in the modern world. However, many companies do not have in-house web design skills, and the task does not justify hiring a permanent employee.
The decision to outsource is never a straightforward one. You will need to carefully consider the capabilities of your business and where your weaknesses are when deciding which aspects of your business should be outsourced to a third party.
Is outsourcing unethical?
Outsourcing can be an attractive option for many businesses because of the potential for cost savings and the flexibility in your business. However, there are some ethical considerations you should consider before deciding to outsource.
The biggest ethical concern with outsourcing is when a business is paying an outside company to manage one of its business functions, but that outside company is outsourcing the work extremely cheaply and closing the gap. doing less. So, while you might think you’re paying a decent salary to an outside contractor, it’s important to make sure they’re actually doing the work themselves, rather than operating the ‘sweat shop’ model.
It’s understandable that outsourcing is a controversial topic, but when done properly, outsourcing can be an ethical way to run your business.
Who benefits from outsourcing?
You must be wondering who really benefits from outsourcing. Is it the company, its employees, its customers or an external third party that actually gets the job done?
The truth is that when outsourcing is done the right way, it can benefit everyone.
The company itself can benefit from cost savings, as well as access to the unique skills of the chosen contractor. They also avoid investing in infrastructure such as hardware, software and technology.
Company employees often find that they have been freed up to focus on their role, as they are no longer being asked to perform tasks that are not in their job description. This can lead to increased employee satisfaction, as well as productivity.
When outsourcing is ethical, a third party contractor will also benefit from the arrangement. They are able to do what they love on a self-employment basis, without being tied into full-time employment with a company.
As your business is able to focus on best practices such as product development and sales, you will find that your customers benefit from outsourcing as well. And, of course, the customer is always the most important part of any business!
Is Outsourcing Right For Your Business?
It can be hard to know whether outsourcing is the right move for your business. It is important to understand that while outsourcing is beneficial to many businesses, it does not mean that it is the right thing to do for every business.
Outsourcing can enable your company to grow by giving you the ability to focus on what’s really important to your business. Whether it’s taking the time to really understand your target market, developing new products or services, or working to secure those all-important sales, outsourcing can enable you to do these things.
However, it is important to understand that there are some risks with outsourcing. This includes the possibility of compromising on quality, missing deadlines or operating below expected standards. Not only that, outsourcing can create problems when it comes to privacy in your business.
The most important thing is to understand the pros and cons of outsourcing and weigh them carefully according to the individual needs of your business. You can then make a decision that is right for your business, whether it means outsourcing or hiring an in-house employee.
Outsourcing involves contracting a particular business function or process to a third party. It can be a contractor, a freelancer or an outside company.
There are many advantages and disadvantages to outsourcing that you need to look at carefully before deciding whether it is the right option for your business. After all, outsourcing isn’t the right decision for every business.
Hopefully this article has given you an idea about both the advantages and disadvantages of outsourcing, so that you can choose an option that benefits your business. If you are aware of the risks of outsourcing, you can work to reduce them, which will help ensure the long-term success of your business.