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The pros and cons of outsourcing

Posted by John Kennedy on Aug 11, 2018 9:58:24 AM
John Kennedy

Have you been thinking about outsourcing one or more tasks within your company?

The financial realities of running a small business can make hiring an in-house IT resource too expensive, especially if you are an early stage small business or start-up.

So, outsourcing your IT support and leasing your hardware should be a natural choice to protect your cash flows and set-up manageable and predictable monthly  costs.

Outsourcing can save money, protect your business from the unexpected and let's you focus on fostering growth.  

According to Deloitte’s 2016 Global Outsourcing Survey outsourcing growth is expected to continue in the years to come. So, now is a good time to compare the pros and cons of outsourcing and how it sits with your company culture.

As a sign of the growth in outsourcing, companies are reporting fewer concerns with outsourcing vendors and their resource and service quality. Outsourcing is expected to see growth across all company functions especially within IT, Finance, and HR

Why do companies outsource?

  • Cost cutting
  • Enables focus on their core business 
  • Solves capacity issues short or long term
  • Enhances service quality by brining in the experts  
  • Critical resource to help stimulate growth
  • Access to intellectual capital 
  • Manages different business environments
  • Drives broader transformational change

If as a business you are spending a disproportionate amount of effort to manage your “non-core” functions, then it could be time to consider outsourcing as an alternative to using internal resources.

A businesses - IT infrastructure, systems, applications, software, hardware, etc. are expensive, complex and often require specific skills to install and manage them, which you may not have access to internally or the knowledge or budget to appoint.

By outsourcing, companies can free up resources and divert funding and focus on what differentiates you as a business.

Advantages of outsourcing

Knowing the benefits of outsourcing will help you decide if this is something that could work for your business:

  1. You don’t have to hire more people

When you outsource, your vendor takes on the responsibility of managing human resources. Which means your business avoids the headache of how to manage your staff during times of boom and slump when you could be over staffed.

  1. Access to a larger expert talent pool 

Many companies find that outsourcing lets them tap into a wider range of expertise that they would not normally have access to. Outsourcing can help streamline or shorten production times because the third-party suppliers are quicker at executing the tasks.

3. Lower resource costs

You don’t want to fall into the trap of trading quality for price, and a well researched supplier cane provide the best of both worlds. Typically not many small businesses can afford to hire an in-house IT team, or specialist competencies - out sourcing provides access to the skills at a lower cost that you could do internally.

4. Free up talent

Divert internal resources to those projects that deliver higher yields. Even when you have your own team that consider themselves technologically savvy, it’s doubtful that they have the necessary IT expertise or time available to effectively manage your specialist IT needs.

5. Meeting regulatory requirements

With the introduction of the new 2018 GDPR (General Data Protection Regulations) it can place heavy demands on organisations to secure their IT systems and personal data. So use a vendor who knows the legislation and how to interpret it.

 

Drawbacks of outsourcing

Despite the many benefits of outsourcing there are some potential drawbacks:

  1. Lack of control

Although you can provide direction in regard to what you need to accomplish, you give up some control when you outsource to your supplier. It can be difficult to control a remote contractor or directly oversee everything that they are doing.

  1. Communication issues

What is your preferred method of communication, are you able to get a response in the time that you want, does a contractor have access to the same internal systems as you do, etc.

3. Impact on company culture

It’s easy to focus on the benefits of outsourcing without considering the impact it can have on your existing employees.

Outsourcing is often confused with the term "offshore" which refers to contracting companies based in another country for products and services, normally for the sake of short term cost savings. Outsourcing is then often perceived negatively, as  management speak for ‘job cuts’. So make sure your team understand why you are outsourcing particular tasks

There are many pros and cons of outsourcing, all of which you should carefully consider before deciding for or against this strategy.

You should pick an outsourcing partner that is adaptable and listens to your needs. Giving away control to an outsourced supplier needs a high level of trust.

Additionally, find a supplier that understands your most valuable asset - your staff. 

Don't forget to take a tour of our Plans, and contact us to learn more about how we can help take your business to the next level. 

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Topics: outsource, small business, startups, technology

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