There are benefits associated with outsourcing services such as reduced costs, improvement of product quality and access to highly skilled personnel. This is on the client side. For the service providers, it helps create employment and is a source of foreign exchange inflows where the outsourcing is offshore. But a process outsourcing company in the developing world also faces a number of risks and challenges. An outsourcing company can only succeed if it knows the risks and finds a way to deal with the obstacles it meets during the course of business.
One of the greatest challenges facing the process outsourcing company today is the ever-increasing levels of competition. While at the early throes of the outsourcing services industry in developing countries, there seemed to be more opportunities than there were businesses to provide them, that is not the case today. There are new companies making their way into the market. Countries such as India that have held a dominant position in the outsourcing market have to contend with competition from many other Asian countries such as the Philippines, China, Taiwan, Thailand, Malaysia and Sri Lanka. There is also competition from African countries such as South Africa, Nigeria, Egypt, Ghana and Kenya. Thus, the process outsourcing company that will survive must find a way of adding value to the service they provide to their clientele.
The other challenge facing many a process outsourcing company in the developing world is concentration risk. As the market thins out, one must now compete for lucrative contracts with more businesses. Many businesses must now make do with just one major contract. If that contract is for some reason terminated, such businesses in the developed world may not be able to survive much longer.
Another setback for the process outsourcing company especially the ones based overseas is geographical distance and subsequent difference in time zones. Some process outsourcing companies have to resort to having their employees working day or night shifts. Sometimes, this may lead to the lack of sleep and in the long run, the staff mental and physical health as well as overall morale may be affected. Eventually, the outsourcing company may get into a vicious cycle where it tries to meet the client’s expectations but never has the right employees to effectively perform the work to the client’s requirements.
Daven Michaels Author of the book Outsource This!