what is Outsourcing?
Introduction to Outsourcing
In today¡¯s modern business environment the term Outsourcing is now common place. In fact perhaps without realising it, outsourcing is already a part of your organisation.
What is Outsourcing?
Outsourcing is the process of contracting out a company¡¯s non-core, non revenue producing internal functions to a specialist (Service Provider). Commonly within the Recruitment Industry this includes payroll, credit control, management accounts and other HR functions.
Advantages of Outsourcing
1. Outsourcing provides a service which might otherwise be performed by in house employees. In doing so it allows the redistribution of a company¡¯s key resources (it¡¯s employees) so that they can focus on other business issues.
2. Service providers will tend to have the latest technology to hand, technology which usually involves high costs to purchase and is simply not feasible for smaller companies to buy. By outsourcing you can indirectly have access to this technology.
3. Service providers will be specialists in their field and will closely monitor any changes in legislation or any new developments.
4. Improved financial monitoring – through the process of outsourcing a company will usually be subject to a fixed monthly cost. Due to this fixed charge, the cost of performing a task is now quantifiable.
5. Overall outsourcing can reduce costs and improve efficiencies.
Disadvantages of Outsourcing
1. You may become dependent upon the outsource provider
2. Sensitive information is more vulnerable
3. Can eliminate direct communication between a company and its clients. This may prevent a business from building a solid relationship with their customers, and often leads to dissatisfaction on one or both sides.
4. If outsourcing to another country, language, cultural and time zone differences may cause a problem.
Something to think about
If you¡¯re thinking of outsourcing there are four steps which we think you should consider.
1. How will outsourcing develop your business?
2. Which activities do you want to outsource, where do you want to outsource and which service provider will you use?
3. What contractual issues are there? How much will the service cost? What are your expectations of the service?
4. When will the change over take place?