There are many factors you must consider before you choose to outsource your business operations. You must weigh the outsourcing pros and cons in order to make an informed decision. Though the main reason for outsourcing your business may be to save money, you may find yourself incurring other expenses not in your budget. Outsourcing refers to the process of sub contracting business operations to a 3rd party contractor. A great example of this business approach is outsourcing human resource. Therefore, before choosing to outsource a portion of your business, you must be aware of the advantages and the disadvantages.
Outsourcing has made it possible for companies to acquire highly skilled labor at good prices. This pro has aided the small businesses to grow at a much faster rate. Workers’ wage rates in the developing nations are much lower than in the developed countries. This fact is an outsourcing pro and con depending on which side of the coin you choose to look at. In the developing nations the workers are not unionized and therefore the wage rates hardly improve in these nations. It’s a great pro to the companies that choose to outsource abroad due to this factor.
Another pro for the companies that choose to outsource abroad is that they are not charged any form of federal or state tax for the employees they choose to hire. This is also an outsourcing pro and con. It’s a pro for the company because the operational costs are greatly reduced and a con because the companies are able to take advantage of this fact. The developing nations have no work assistance programs set in place and so the wage rates of their workers continue to be low.
Another pro to consider is that outsourcing your business allows companies to reduce the operational costs significantly as compared to if you they chose to carry out the operations themselves. There are no training costs incurred by the companies. The reduced salary also plays a key role in the reduction of the operational costs. The outsourcing pro and con of this is that the companies reduce their costs of operations and do not need to incur other costs such as equipment purchase and maintenance. The con is that the outsourced company incurs all these costs and still pays there workers low salaries.
The small business enterprises take advantage of the fact that outsourcing allows them access the latest technology available. They are able to afford these services as compared to if they chose to acquire the technology themselves. Another plus for these companies is that they are able to acquire employees that work on site 24 hours a day.
Daven Michaels Author of the book Outsource This!