Outsourcing is a business practice in which a company hires a third party to perform tasks traditionally performed in-house.
This removes the need for the hiring business’ staff to perform those tasks, freeing them up for other activities or allowing the business to reduce its size.
The third party arranges for its own workers to perform the outsourced tasks either at the hiring business’ premises or from external locations.
What tasks can you outsource?
Companies can outsource a wide variety of tasks. Some of the most common outsourced services are:
Information technology (IT) – External providers can deliver the technological processes, applications, and infrastructure businesses need to carry out their operations.
Accounting – Financial service from third parties, for example, payroll outsourcing that helps ensure employees receive their pay checks on time. This can also include advice and taxes and legal compliance.
Human resources – Third parties can offer day-to-day support with a range of HR activities, such as workplace safety, recruitment, and benefits administration.
Other common outsourcing services are administration, customer support, manufacturing, marketing, research, sales, and logistics.
What are the benefits of outsourcing?
There are many reasons why a business might choose to outsource a particular set of tasks, including:
Reduced costs – In contrast to employees that require training and expect a consistent pay package, outsourcing contractors are experts available on a need-by-need basis, offering a much more cost-effective option in terms of training and recruiting.
Improved focus – When you outsource non-critical activities to a third party, you free up your staff to focus on strategy and other essential business tasks.
Access to expertise – Partnering with an external team can give you access to several experts with more combined insights than a single in-house worker could provide.
What are the risks of outsourcing?
However, there are some reasons why outsourcing might not be the best fit for your business. These include:
Limited control – Putting business activities in the hands of a third party leaves you with little control over how well they’re performed. Some outsourcing services can involve the provider in handling your business’ sensitive data, exposing you to GDPR breaches.
Communication difficulties – It can be more challenging to communicate with external providers via telephone or video calls than it would be with an in-house employee face-to-face. This is only exacerbated if the third party is overseas, as is often the case when outsourcing services such as customer service.
Lack of domain knowledge – While outsourcing specialists will have expertise in their service, they could have a limited understanding of your business’ particular domain and industry.
The bottom line
Outsourcing can be advantageous for your organisation, especially where time, money, and focusing and business objectives are concerned. That being said, there are downsides that are worth considering carefully. Make sure you properly weigh up the pros and cons for your business before moving forward.