Outsourcing management involves hiring an outside party to take over the management of a particular process in a company. The primary purpose for outsourcing management of particular services is to lower the amount of cash and resources deployed to a given business process in house. This also gives the management more time to concentrate on core processes and enhances the business flexibility to meet various business targets.
When outsourcing management, the business hands over the management and control of a process to another service provider but it still retains overall ownership and responsibility of the process. While it is true that the business will have a contract with the service provider, it still has to ensure everything is done in a way that does not jeopardize its relationship with customers, shareholders, employees and regulators. This is important for businesses to realize since the third-party service providers may not be driven by the same aspirations, values, standards and purposes that drives the business. This form of cross-purpose can lead to the business not attaining what it anticipated when getting into outsourcing.
Another key disadvantage can be the occurrence of hidden fees that may not have been covered by the contract or were defined ambiguously. Because of this, some businesses have found themselves spending more than they thought and thus defeating the very goal of saving costs through outsourcing management. For this reason, a business would be well advised to incur considerable costs engaging an experienced lawyer to scan through the contract before committing to it. This one action can prevent future problems.
Another disadvantage of outsourcing management is the risk of financial instability in the service provider. The economic well-being of the third-party service provider has direct repercussions on their ability to deliver services on time. No business would want to wake up one day and find that the outsourcing company has gone bankrupt leaving it with critical business processes unattended. Then there is the outsourcing companies that attempt to cut cost and thus lower the quality of service being provided to the business.
Opting for outsourcing management can also hinder a business’ ability to rapidly respond to changes in the business environment. Hiring an outsourcing company also leads to the laying off of some in house staff which has repercussions on internal staff morale and on the perception of the business within the community it operates in.
Daven Michaels Author of the book Outsource This!