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Top Advantages and Disadvantages of Outsourcing

Who doesn't need an extra pair of hands now and then? Especially when it comes to Small and Medium-sized Enterprises (SMEs) development, understanding the benefits of outsourcing represents crucial...

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Who doesn't need an extra pair of hands now and then? Especially when it comes to Small and Medium-sized Enterprises (SMEs) development, understanding the benefits of outsourcing represents crucial knowledge that may have a deep impact on the company's short- and long-term growth. 

According to Statista, the outsourcing market went up to 971.2 billion U.S. dollars in 2023, and the tendency is supposed to keep on expanding in the following years. Deloitte also reported that 50% of the interviewed executives identified talent acquisition as a top internal challenge, which is one of the main reasons companies prefer to hire third-party experts instead of investing in their in-house talent.

A LinkedIn report states that IT-related jobs and computer programming, robotic process automation (RPA), help desk support, business process outsourcing (BPO), and digital customer care were the top five most outsourced services both in 2022 and 2023, as these solutions continue to become more accessible and applicable for most industries worldwide.

While some brands are quite open about their success stories, all thanks to hiring powerful external partners, some old-fashioned customers still raise an eyebrow when they find out that their providers don't possess an in-house legion of high-end collaborators.

At Helpware, we proudly label ourselves as an “Amazing People as a Service” provider. With more than eight years of expertise in the Business Process Outsourcing (BPO) industry, we feel qualified enough to share a word or two about the pros and cons of outsourcing. The following insights will help you understand if your company is ready to outsource some extra, highly skilled set of hands… if you are not doing so already.

What is Outsourcing?

Ok, let's start with an easy one. Unless you've been hiding under a non-business-centered rock through the last decade, you must have come across the concept of outsourcing a gazillion times by now.

In simple words, outsourcing means hiring a third-party company (usually operation-niche experts) that handles certain tasks for another business, such as manufacturing goods or providing services, often formalized through a contractual agreement delineating responsibilities and expectations for both the hiring company and the final client.

Delegating a specific set of activities to an external provider enables organizations to focus on core functions and trim operational costs, to mention some of the most basic reasons why SMEs rely so heavily on these trustworthy partners.

Given that external providers may offer superior services or products at a more favorable price point, outsourcing becomes a viable option across a spectrum of functions, including customer support, back-office tasks, marketing, and beyond.

In essence, outsourcing emerges as a strategic tool for bolstering business resilience. Instead of maintaining a full-time, in-house workforce that would require ongoing training and HR assistance, organizations can outsource well-defined functions to specialists who can execute them through an efficient, goal-oriented structure. And this is just one example of the multiple outsourcing benefits available for decision-makers.


Most Requested Outsourced Services for SMEs

Most Relevant Advantages of Outsourcing

While outsourcing applications are too variable to come up with a one-size-fits-all integration, it is possible to identify the top pros and cons of outsourcing any type of service or product. Let's begin by examining the most relevant outsourcing advantages for small businesses:

1. Decrease payroll expenses

For many businesses, labor constitutes one of the most substantial expenses. Salaries continue to rise, and the actual cost of employment extends beyond the weekly paycheck, encompassing expenses like training, healthcare, travel, and additional benefits. By outsourcing specialized activities, it is possible to leverage experts without having to manage them directly.

2. Save on infrastructure

When it comes to digital-based providers, such as cloud-based services, the cost of maintaining and optimizing both hardware and software tools can become overwhelming for starting businesses. Hiring an external party of digital solutions not only provides the opportunity to leverage this gear, but you can also deploy the experts who know best how to handle the tech.

3. Prioritize core competencies 

In the midst of bustling schedules, it's common to overlook important yet non-urgent tasks. Outsourcing these less pressing aspects enables you to concentrate on honing your company's strengths and distinguishing it as a leader in its field and tier.

4. Provide a round-the-clock service

Leveraging a global talent pool allows you to transcend the confines of the traditional eight-hour workday. By enlisting collaborators from different time zones, you unlock the potential to establish a continuous 24-hour production cycle. This translates to managers finding completed work awaiting them in their inbox at the start of each day, facilitating quicker project turnaround times for clients. This is one of the favorite outsourcing advantages for decision-makers.

5. Enhance productivity

During periods of intense workload, outsourcing can serve as a vital support system. Many businesses experience predictable peaks in activity, while others struggle to expand their permanent workforce quickly enough to meet demand. Outsourcing provides a means for in-house employees to stay focused despite production spikes or hefty onboarding processes for multiple clients.

6. Achieve a competitive advantage

Outsourcing presents a strategic avenue for small businesses to transcend their competitive limitations. By maintaining a lean core team and leveraging resources nationwide or globally, companies can harness a wealth of experienced talent or expand their service offerings at a competitive price point, outperforming rivals in the process.

7. Access a global talent pool

In today's fiercely competitive labor market, companies are intensifying their recruitment efforts to address workforce shortages, presenting challenges for both startups and established businesses alike. Instead of recruiting candidates to relocate to your location, you can tap into a vast network of companies worldwide that specialize in the skills your organization requires.

8. Grow within budget limitations

Entrepreneurs can strategically leverage outsourcing to foster business expansion without exceeding their financial constraints. Outsourcing to a specialized and cost-effective firm may prove more advantageous than establishing an in-house team from the ground up. This also opens the opportunity for focusing resources on branding and positioning efforts.

9. Exploit external expertise

Enlisting the services of an independent contractor enables you to tap into a wealth of experience. By bringing seasoned expertise into your organization, you not only enhance existing business functions but also foster the introduction of new initiatives. This eliminates the need to train inexperienced personnel or establish entirely new divisions, saving you both time and money. 

10. Hire motivated third-party contractors

Outsourced contractors are inherently driven to ensure your satisfaction. While all employees should ideally be motivated, third-party providers lack the job security afforded to in-house staff, as their tenure is often tied directly to specific projects or contracts. Thus, they are incentivized to consistently deliver exceptional work, knowing that their reputation and future opportunities hinge on their performance.


Most Relevant Advantages of Outsourcing

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Most Common Disadvantages of Outsourcing

While the previously mentioned benefits go wide and far, it is important to weigh its advantages against the potential drawbacks of outsourcing. This way, you'll have access to both sides of the story and will be able to take on the best decisions to boost the efficiency of your company.

Here are some of the most basic outsourcing disadvantages:

1. Loss of oversight

While you can offer guidance on your project's objectives, outsourcing may lead to a certain degree of unfamiliarity with the client. It's only natural that the remote state of the arrangement can pose challenges in maintaining the desired level of supervision over the work being performed, but when the contract is clear and the objectives are grounded, managers usually find a way to gain control over the hired services.

2. Security threats 

With an increasing number of individuals gaining access to the corporate network, databases, and assets, new safety risks may emerge. Just as hiring a new employee carries inherent risks, entrusting tasks to a third-party company presents a certain degree of vulnerability. That said, it is almost mandatory to investigate the trustworthiness of the outsourced company before any deal is made.

3. Communication challenges

While not always a significant factor, communication can become a threatening outsourcing disadvantage if not treated with the proper care and attention. To clarify inquiries such as time zones, communication methods, and dependable internet infrastructure are some of the most basic needs to facilitate seamless communication.

4. Supply chain integration

Numerous enterprises opt to outsource their manufacturing processes, followed by entrusting external entities with the storage, picking, packing, and shipping of the finalized products. In this interconnected supply chain, the delivery challenges faced by these third-party providers become your own, and it is your responsibility to solve your client's needs in time and place.

5. Protection of intellectual property

It's imperative to ensure the right safeguards for your intellectual property, formulas, and trade secrets. In certain jurisdictions, legal documents may hold little sway, and there's a risk of your product (or your client's product) being illicitly replicated and distributed through alternative channels without your awareness.

Most Relevant Cons of Outsourcing

Explore Outsourcing Benefits with Helpware

As we move forward into a globally interconnected business environment, it is only logical that companies will be more able to focus on their core business, while allowing highly skillful third parties to be in charge of the tasks that are derived from their very own specialties. In other words, outsourcing allows both in-house and third-party talent to prioritize their strengths while letting others take care of their weaknesses. 

As a people-centered BPO, Helpware is in a never-ending state of optimization. Both our specialists and the tech they deploy to satisfy our client's needs are constantly adapted to match the speed at which the market moves. This is the only way we can remain on top of such a competitive landscape.

By boosting the pros and diminishing the cons of outsourcing, our goal is to help companies of all sizes and industries accomplish their goals and keep on growing together in a relationship that feels like a close and devoted collaboration rather than a simple external agreement. Are you in?

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