Top 5 Secondary Reasons of Outsourcing and Its Top 3 Risks

August 22, 2013

A lot has been said about outsourcing, both positive and negative, many reasons to do or not to do it have been named. In any case, one of the primary causes why company owners go with the decision to outsource part of their business is usually the need to reduce costs. But is this the only motive that drives businessmen when they adopt such a strategy? Or is there more to it than simple desire to save some funds? Let's see.

  1. When the commitment to outsourcing is made, it is normally followed by delegating certain amount of job over to the outsourcing partner, which allows focusing on the core business processes without having to waste a lot of time on tasks with minor value.
  2. Another reason, why companies choose to outsource is lack of in-house resources able to fulfill all the current and perspective requirements. In such a case the staff hired as an outsourcing provider is often the answer.
  3. In terms of risks mitigation when it comes to either ‘putting all eggs in one basket' or finding a wiser solution outsourcing yet again appears to be a logical option to follow.
  4. Some firms go with outsourcing in order to expand and acquire access to more areas of the market. In this way they deliver a certain service or production point nearer to their end users.
  5. Outsourcing opens an access to the global knowledge base and many companies are successfully using this option.

Ultimately, multiple companies outsource for variety of reasons, and cutting costs is not the only, even though one of the core causes, to follow this complex strategy. And even though this may be different from one organization to another, with correct implementation of outsourcing business processes the end result is generally pretty worthwhile.

Risks

Delegating responsibilities may always cause certain problems. Therefore, business owners should remember about possible risks when starting to outsource.

As for outsourcing in general, we can mark out the following common risks:

  1. Security issue is the most important on this list. An outsourcing company should protect client data at every possible level. So make sure that a contractor has security guidelines applied and their infrastructure is safe and reliable.
  2. Some organizational tasks can't be outsourced that easy. Any company has its own standards and they may differ from those that the outsourcing provider has. So you should check all the standards of the outsourcing provider and make sure that the development process does not contradict with any of your demands to quality or whatsoever.
  3. Loss of control is a common feeling with some managers and business owners. It feels like the job is done without any control and some additional supervision is required. But this feeling disappears when the outsourcing company provides regular reports or flexibly shares all the working progress with the customer.

All these risks can be avoided altogether if you discuss everything with the company you're going to work with. Asking out previous customers of the outsourcing provider regarding similar issues could be also of great help.

In case you are still in “outsource or not to outsource” dilemma, hopefully this article resolved it.

If anyone has in mind more reasons why companies outsource or risks they can face, let's discuss them in the comments!

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