Question: What is Outsourcing?
Outsourcing is a business practice where a company delegates some of its functions to an external company or vendor who is specialized in the outsourced business function. For instance, a company may decide to outsource its IT operations to an IT vendor in Philippines or India.
Question: what is the immediate benefit of outsourcing?
When a company outsources part of its operations, it gains immediate cost-saving advantage. This is particularly true if such company was previously incurring high costs in carrying out the outsourced operation. However, a company must ensure that it is significantly more cost effective to hire outsource services provider than performing the task in-house.
Question: Can a Small Business Embark on Outsourcing?
Sure, small businesses are increasingly using outsourcing to achieve cost and performance efficiency, and to grow their businesses ultimately. In previous years, only the large corporations had access to certain business operation enhancements due to the cost involved in such enhancements. But today, small businesses are able to access those modern enhancements for business growth. This is made possible through outsourcing.
Question: Is outsourcing a risky business decision?
Every other business decision comes with element of risk, so outsourcing is not an exception. And, just as a company can manage the risk resulting from other business decisions, it can also manage potential risks associated with outsourcing. One of the best ways to manage potential risk from outsourcing is to ensure a strong contractual relationship between your company and the outsource services provider. Also, thorough vendor selection process helps to reduce the potential risks associated with outsourcing.
Question: Is cost saving the only benefit of outsourcing?
Certainly not, there is a long list of benefits accruing from outsourcing. They include tax incentives, access to large talent pool, shared risk, increased speed in entering the market and other competitive advantages, staffing flexibility, reduced overhead costs and more.
Question: Is outsourcing a legally binding venture?
As mentioned earlier, providing a strong contractual platform between your company and the outsourcing vendor is a great way to manage potential risks associated with outsourcing. All necessary legal documents should be provided and signed by both parties. There should be extensive provision for compensation, so that a party that suffers breach of contract would be compensated adequately. Contractual certainty is one of the top benefits of business outsourcing.
Finally, when a company contracts outsource services for the right reasons, it will enjoy loads of benefits. Also, the need for proper vendor selection process cannot be overemphasized. Some of the consequences of shabby vendor selection include late delivery, substandard service or no delivery. So, do not be lenient with the vendor hiring process. If you don’t know what to do, contact an expert for help.
Daven Michaels is an award-winning outsourcer and author of the book, ‘Outsource This!’ Daven has been honored more than any other individual or outsourcing organization. You can get more information on outsourcing by visiting www.123Employee.com