To outsource or not to outsource, that's the question

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Many companies wonder if they should outsource certain functions to reduce costs. While this formula can help reduce costs, it can also have drawbacks.

Outsourcing, also known as “outsourcing”, consists of a company contracting with another organization to carry out a series of functions previously carried out by the company itself.

There are many services that can be subcontracted: administration, maintenance, even part of the production process can be transferred to another company. This is the case of a company like Nike, which, thanks to outsourcing, its sales increased by more than 35% in 1996. The sports brand transferred the production phase to other companies, taking care of the pre-production and post-production phases. . However, it should also be noted that according to some sources the production was carried out under conditions of labor exploitation. And, when it comes to subcontracting, you also have to pay attention to ethical aspects.

Depending on the type of activities that the company subcontracts, we will be facing a tactical outsourcing or a strategic outsourcing. Thus, if the company subcontracts the cleaning service, it would be a tactical outsourcing, since it is an auxiliary task. On the contrary, if the company chooses to outsource the entire production process, we would be facing a case of tactical outsourcing, since a fundamental task for the company is being outsourced.

Reasons for outsourcing

That outsourcing offers multiple advantages for any business organization is a fact. Next, we are going to present the arguments in favor of outsourcing.

Allows you to focus efforts on the most important areas

Outsourcing certain functions can allow the company to focus on fundamental processes, turning its energies on the activities that affect its business the most. In this way, auxiliary or secondary tasks will not absorb so much time or resources.

Cost reduction

Probably one of the most important reasons when betting on outsourcing is cost reduction. There are many occasions when a company offers services at a cheaper cost than what a company could face when carrying out the activity itself. Proof of this is that many companies have increased their profits by reducing expenses through outsourcing.

Experience and specialization of subcontracted companies

Outsourced companies are specialists in carrying out the tasks for which they are hired. In other words, they have extensive experience and are more efficient. Thus, by subcontracting with an experienced and economically efficient company, there will be certain advantages over other competing companies. Precisely the relationship between the contracting company and the subcontracted company can lead to a symbiosis, a way of working together that benefits both companies.

Flexibility

One aspect of outsourcing or outsourcing that should be emphasized is flexibility. The contracting company can decide when to subcontract to another company, continuing with its activity without causing any problem. Thus, it is clear that outsourcing leaves open a wide range of suppliers to the contracting company.

Problems derived from outsourcing

We previously pointed out that subcontracted companies are true specialists in providing certain services. Well, as specialists, these companies have technologies that are not always at hand for the contracting companies.

However, all that glitters is not gold and before outsourcing, you don't just have to focus on cost reduction, as there are many other issues to weigh.

Find a good supplier

If a service is outsourced to an unserious company, which does not comply with the terms agreed in the contract, this can lead to problems for the contracting organization. In this way, the contractor could run into problems in its production and supply processes, without forgetting that the consequences could also harm it financially, administratively and even its reputation.

The technology

Today, technological aspects are key in competition between companies. Therefore, if certain functions are left in the hands of other organizations, the company itself can lose contact with technology, become out of date or fall into a deep technological ignorance.

Corporate culture

Company culture is the values ​​of a business organization, its way of understanding work, day-to-day life and tackling challenges. There will hardly be a fruitful relationship with the outsourced company if it does not share a similar business philosophy. They will have different ways of doing things and therefore there will be problems.

The importance of good planning

Delegating functions has its advantages, as it helps reduce costs. However, if outsourcing planning has not been done properly, costs can end up increasing.

Lost of control

Outsourcing functions means that the company can focus on core activities, but it can also lead to problems. By leaving certain areas in the hands of third parties, there is a loss of control and, in the absence of vigilance, situations of disloyalty, theft and fraud can occur. Hence, it is necessary to establish a certain level of supervision of the outsourced areas.

Low quality of service

It is a fact that outsourcing can help reduce costs, but many times, faced with very attractive offers for hiring companies, outsourced organizations can end up offering low quality services.

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