As a small business owner, it is often a challenge to distinguish between the pros and cons of outsourcing a business function. To make the decision process as easy as possible, a good understanding of the pros and cons of outsourcing is necessary to provide you with all the information you need.
Pros of Outsourcing
The primary catalyst behind outsourcing is cost savings. Regardless of the product or service, by outsourcing, a company can save money it would otherwise be forced to spend on new equipment, technology, employees’ salaries and employee training. Cost is typically the reason a company considers outsourcing.
For small business owners, it can be argued that cost savings aren’t always the most important factor when considering outsourcing. Small businesses often have a limited amount of man power and may not be skilled in the area needing professional attention. Therefore outsourcing provides small business owners with a flexible approach to adding skilled resource to their business.
As managers our business should be working as productively as possible. Deadlines must be met and customers are no longer prepared to wait as long for the service or product they are paying for. By establishing areas of the business you are proficient at, you can choose areas to outsource and create a well-planned outsourcing strategy. Popular areas to outsource are bookkeeping , payroll and marketing, in particular social media.
Cons of Outsourcing
Outsourcing can have its drawbacks too and it is important to plan for every eventuality when weighing up your options. The biggest theoretical problems with outsourcing are:
Oversight, or Lack There of
When a small business outsources a product’s development or a service, it is very difficult for that company to monitor the activity of the outsourcing service it hires. Often it is not until the finished product is presented that the hiring company knows what has happened. Lack of oversight can lead to major losses in time, money and resources — particularly if the product does not function as required.A lack of communication can encourage a lack of oversight which can lead to high failure rates.
Lack of Cohesion
Poor planning and strategic direction can lead to a lack of cohesion.Especially when more than one outsourcing service company is involved, gaps can appear in product and service unification. As one portion of a product is developed in one location and other parts are developed elsewhere, the odds of non-symmetry are greatly increased. Product development teams that are not working in conjunction with one another have a difficult time understanding their — and the other teams — limitations and expectations.
Lack of management can lead to failures and while outsourcing is time efficient, once a mistake occurs, it is more difficult to make adjustments. Once it is understood that making fixes is required, those changes will add time and money onto a project, and for a small business money is precious.
Weighing the Pros and Cons
The important part of weighing up the pros and cons is determining what can and cannot be controlled and potential failures from lack of control. When considering to outsource a product or business function think carefully about the potential financial and productivity gains and losses.
If in doubt look at your business strategy for direction. This will identify where efficiencies can be made. Appoint a member of staff to project manage who will maintain regular communication with the external company. Professional document sharing can help you communicate and lead the project. Failure to do so will lead to the proverbial snowball effect and we don’t want that!