Business process outsourcing or business outsourcing is the process of contracting secondary business activities like payroll, human resources, accounting, customer services, etc. to a third-party company. All businesses outsource most of their non-primary activities to focus on the core business activities.
Outsourcing various activities is an essential part of every business. But it has advantages as well as disadvantages. This article will help you to understand the various benefits and drawbacks of business process outsourcing.
Advantages Of Outsourcing Your Business
Return Of Investment Will Be Higher
When you outsource your business, you will be able to reduce costs significantly and you will be able to save money. When you outsource services like customer service, medical billing, etc. to a country with a low cost of living, you will get access to quality services at a much lower cost. This way you might be able to save 60 % of your cost.
Able To Focus On The Core Activities
When you have to do additional non-core activities of your business, your workload will be increased and you won’t be able to focus on the core activities that needed for the growth of the business. With outsourcing, a third-party can take over the non-core activities of your business and you will be able to divert all your resources to the primary business tasks.
Get Skilled Expertise
One of the main advantages of outsourcing your business is that you will get experts to work on different tasks of your business. If you outsource the marketing aspect to a third-party, they will provide skilled professionals to do all the marketing aspects of your business. They will make good marketing strategies that will help your business to increase the clientele and you can focus on the core activities of your business.
Your Business Will Be Open 24 x 7
If you outsource services like medical billing, call center, teleradiology, etc to a country that is in a different time zone, you will be able to open your business the whole 24 hours. It will help in improving your customer service. Once your employees go home after work, your outsourcing partner can take over and continue the work. They will complete the tasks each day send them back for review.
Improved Customer Service
With the skilled expertise of your outsourcing partner, you will be able to give your customers quality services effectively and quickly. Outsourcing will help you to deliver your products on time and provide high-quality services. All these will help in customer satisfaction and help you to build a good relationship with your customers.
|High return of investment||Confidentiality risks|
|Skilled expertise||Loss of control|
|More focus on core business tasks||Expensive|
|Better customer service||Quality issues|
Disadvantages Of Business Outsourcing
Risk Of Confidentiality
One of the greatest disadvantages of outsourcing your business services is the high risk of confidentiality. When you hire a new employee, involve a new partner in your business or hire a new supplier, you increase your confidentiality risk. Even with outsourcing, you might need to share some confidential business data with the outsourcing partner. There before you outsource your business to a third party, make sure that they have a good reputation.
Lack Of Internal Talent Development
You outsource you a particular business activity when you don’t have enough expertise in that aspect. But you will lack the opportunity to develop internal talent for the outsourced task. This might become difficult if you are planning to bring the function back in-house. The only way to overcome this problem is to hire a third party temporarily and give your employees enough training during that period.
Loss Of Control
One main risk involved in outsourcing is the loss of control of that particular business process. If your outsourcing partner is working from a different country, it will be difficult to monitor them. You won’t have any guarantee that they are doing their job correctly. You need to establish frequent communication with the outsourced personal to make sure that they are doing their job right.
It Is Expensive Sometimes
When you pay a third party to do certain work of your company, you are probably going to pay them more than what it cost you to do it with your own employees. Even though, you will get a high return of investment if you outsource your business to an experienced and reputable company. Thus, you won’t mind the little extra money you need to spend on outsourcing.
Issues With Quality Of Services
Indeed, you will be able to provide quality services to your customers if you outsource your business tasks. But that is not always the case. If your outsourcing partner does not have enough expertise, they won’t provide the services with the quality you expect. This may have a negative impact on the reputation of your business and there is a high risk of loss of customers.