Экономические науки/6.Маркетинг и менеджмент
Volovyk O.O. Volovyk N.O.
Donetsk National University of
Economics and Trade
named after Mikhailo Tugan-Baranovsky
Outsourcing has seen a lot of press recently. Some look to outsourcing
as the savior of their company; others see outsourcing as an evil job-killing
tactic of management. Before you start to evaluate if an outsourcing strategy
is right for your company, you need to understand what it is and what it is not.
What are the advantages and disadvantages to outsourcing in the global
marketplace?
In
these times of great globalization where many countries have erased their
borders when it comes to trade outsourcing has become an option for many
companies. Whether or not to outsource is a key question that companies must
consider. According to the Pros and Cons of Outsourcing. The decision to
outsource or not is a matter of finding the right balance-the balance between
managing labor costs, workflow, employee capabilities, customer commitments,
core competencies, and even short- and long-term risks. There are many
advantages and disadvantages to outsourcing. These advantages and disadvantages
will be discussed in this paper.
Advantages of Outsourcing
As you
evaluate your choices and decisions in outsourcing different components of your
operations, you will need to consider the advantages of outsourcing. When done
for the right reasons, outsourcing will actually help your company grow and
save money. There are other advantages of outsourcing that go beyond money.
Here are advantages of outsourcing.
1. Focus On Core Activities
In rapid growth periods, the back-office operations of a company will
expand also. This expansion may start to consume resources (human and financial)
at the expense of the core activities that have made your company successful.
Outsourcing those activities will allow refocusing on those business activities
that are important without sacrificing quality or service in the back-office.
2. Cost And Efficiency Savings
Back-office functions that are complicated in nature, but the size of
your company is preventing you from performing it at a consistent and
reasonable cost, is another advantage of outsourcing.
3. Reduced Overhead
Overhead costs of performing a particular back-office function are
extremely high. Consider outsourcing those functions which can be moved easily.
4.
Operational Control
Operations whose costs are running out of control must be considered for
outsourcing. Departments that may have evolved over time into uncontrolled and
poorly managed areas are prime motivators for outsourcing. In addition, an
outsourcing company can bring better management skills to your company than
what would otherwise be available.
5. Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands
to bring in additional resources when you need them and release them when
you’re done.
6. Continuity & Risk
Management
Periods of high employee turnover will add uncertainty and inconsistency
to the operations. Outsourcing will provided a level of continuity to the
company while reducing the risk that a substandard level of operation would
bring to the company.
7. Develop Internal Staff
A large project needs to be undertaken that requires skills that your
staff does not possess. On-site outsourcing of the project will bring people
with the skills you need into your company. Your people can work alongside of
them to acquire the new skill set.
Disadvantages
of Outsourcing
As you
evaluate your outsourcing choices, keep in mind that there are advantages to
outsourcing and disadvantages of outsourcing. Look at each one of the
outsourcing disadvantages listed below and decide what impact that item would
have on your business. If the outsourcing disadvantages outweigh the advantages
of outsourcing, then you should avoid outsourcing those operations.
Whether
you sign a contract to have another company perform the function of an entire
department or single task, you are turning the management and control of that
function over to another company. True, you will have a contract, but the
managerial control will belong to another company. Your outsourcing company
will not be driven by the same standards and mission that drives your company.
They will be driven to make a profit from the services that they are providing
to you and other businesses like yours.
You
will sign a contract with the outsourcing company that will cover the details
of the service that they will be providing. Any thing not covered in the
contract will be the basis for you to pay additional charges. Additionally, you
will experience legal fees to retain a lawyer to review the contacts you will
sign. Remember, this is the outsourcing company's business. They have done this
before and they are the ones that write the contract. Therefore, you will be at
a disadvantage when negotiations start.
The
life-blood of any business is the information that keeps it running. If you
have payroll, medical records or any other confidential information that will
be transmitted to the outsourcing company, there is a risk that the
confidentiality may be compromised. If the outsourced function involves sharing
proprietary company data or knowledge (e.g. product drawings, formulas, etc.),
this must be taken into account. Evaluate the outsourcing company carefully to
make sure your data is protected and the contract has a penalty clause if an
incident occurs.
The
outsourcing company will be motivated by profit. Since the contract will fix
the price, the only way for them to increase profit will be to decrease
expenses. As long as they meet the conditions of the contract, you will pay. In
addition, you will lose the ability to rapidly respond to changes in the
business environment. The contract will be very specific and you will pay extra
for changes.
Since
you will be turning over part of the operations of your business to another
company, you will now be tied to the financial well-being of that company. It
wouldn't be the first time that an outsourcing company could go bankrupt and
leave you holding-the-bag.
The
word "outsourcing" brings to mind different things to different
people. If you live in a community that has an outsourcing company and they
employ your friends and neighbors, outsourcing is good. If your friends and
neighbors lost their jobs because they were shipped across the state, across
the country or across the world, outsourcing will bring bad publicity. If you
outsource part of your operations, morale may suffer in the remaining work
force.
With
all these pros and cons of outsourcing to be considered before actually
approaching a service provider, it is always advisable to specifically
determine the importance of the tasks which are to be outsourced. It is always
beneficial for an organization to consider the advantages and disadvantages of
offshoring before actually outsourcing it.