Outsourcing for business is a fast growing trend and has increasingly been accepted as an integral part of conducting modern day business. The benefits of outsourcing are well known and revolve around time and cost savings. However, just like every coin has two sides, so does outsourcing for business. A company should be careful that these shortcomings, however negligible do not negate the benefits that would otherwise be realized by outsourcing.
The first drawback in outsourcing for businesses is that it poses a major threat to a company’s internal innovation capacity. When a company develops a habit of taking on a third party service provider for key internal processes, the company’s internal knowledge base starts to diminish. Thus, the company’s delivery of a quality experience to its customers may deteriorate since internal staff may not be able to keep up with changing market trends.
Another downside of outsourcing for business is that it sometimes leads to product uniformity and the lack of variety. Over time, outsourcing service providers in the same country may start to use almost identical techniques in the delivery of goods and services to their clients. The result is that competing businesses that outsource to the same country may start to have products whose only difference is in the branding and packaging. Customers eventually latch onto this and it becomes difficult for a business to have a competitive edge in the market since products from different manufacturers become almost indistinguishable in function and design.
Outsourcing for business can also lead to the establishment of a dependency syndrome. This dependence on third- party service providers to carry out important company functions can see the business hamstrung if any of the third service providers were to pull out or collapse without warning. Through outsourcing, a business starts to lose control of its operations. Even though there is a contract between the business and the service provider, the truth is that trust still comes into play in the sense that the business expects the service provider to deliver on what they promise. A business also expects the service provider to be in familiar with certain small nuances that in actual sense can have a major impact on customers.
When a company opts for outsourcing for business, this will almost always lead to the loss of jobs of some of its staff. For businesses operating in a closely knit community, the community may be dissatisfied with the company’s actions. If this belief and perception spreads, it might lead to boycotts of the company’s products.
Daven Michaels Author of the book Outsource This!