Outsourcing: Benefits & Challenges

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Outsourcing is a fast growing business practice worldwide with many government institutions and companies in diverse industries using business process out-sourcing services, because of its enormous economic and financial benefits- a strategy that profits company’s bottom line.

Outsourcing has been variously defined by individuals viewing it from different perspectives.

Outsourcing is the delegation to an external organization of the performance and management of operations or entire processes that are not fundamental for the clients and are not directly related to their main market activities. It is the business practice of hiring people outside a company to perform services that traditionally were performed within the company- the contract or subcontracting of none core activities to free up cash, personnel, time.

The external service provider performs and manages a specific business function, while simultaneously contributing to its development and improvement. Examples of frequently outsourced services include HR, Payroll Processing, Power & Electricity, Accounting, Information Systems Maintenance and Support, Training, Fleet Maintenance, Building Maintenance, etc.

BENEFITS:

• Allows organisations spend more time concentrating on core business processes.
• Gives company access to professional, expert and high-quality services.
• Enables organisations experience increased efficiency and productivity in non-core business processes.
• Lets company streamline their business operations.
• Helps Company save time, effort, manpower, operating and training costs, thereby giving her overall cost advantage.
• Increase flexibility to meet changing business and commercial conditions

  • Experience increased control of Company business.
• Saves Company on investing in latest technology, software and infrastructure and enables the external contractor handle the entire infrastructure.
• Gives organizations the assurance that her business processes are being carried out efficiently, proficiently and within a fast turnaround time.
• There is always buffer to draw from in cases of emergencies                                            •Offshoring can help organizations save on capital expenditures.
• Company can save on team management problems as her offshore partner will be managing the team who does her work.
• Enables the company cater for the new and challenging demands of her customers.
• Free up the cash-flow of the company.
• Share her business risks.
• Give the Company business a competitive advantage – increase productivity in all the areas of her business.
• Can help organization cut its operational costs by 50% or more.

CHALLENGES:

• Does not give the outsourced employee the required confidence to stay on the job for long as they feel inferior                                                                                                                                                    •The rate of labour turnover is high as there is no job security for employees                                          •Exposure of confidential information to outsourcing partners could be a security threat;
• Company might find it difficult to manage the offshore labour provider when compared to managing processes within your organization.
• It can create potential redundancies for your organization and your employees might express lack of interest or lack of quality at work.
• Outsourcing staff provider might be catering for the needs of several companies and may not be able to give your company 100% attention.
• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed.
• Organization might suffer from lack of customer focus.
• There can be several disadvantages, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.

Before venturing into outsourcing as a Company, there is need to consult experts.

Contributed by Agolo Uzorka

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