Have you ever wondered if outsourcing part of your activities would be beneficial for your company? I explain below the main advantages and disadvantages of this business practice.

 The advantages of outsourcing:

 First of all, the main advantage of outsourcing is the reduction of production or management costs for your company. It also remains the main reason that leads organizations to outsource. If you decide to go the outsourcing route, you should manage to save 25 to 30% on average on the activity you entrust to an external company. This figure is indicative, but generally below 30% your outsourcing case will not be viable in the long term. Or at least, it won’t be worth it if your main motivation is cost reduction. The announced benefits generally erode over time (due to an oversight, renegotiation, inflation, technological breakthrough …).

 The second benefit of outsourcing is finding quickly and in large quantities of skills that you do not have, or not enough internally, and that you need to develop. The advantage of using an external organization to find your talents, for an (un) determined period, is that you will not have to hire them. You therefore avoid additional harassment. This new collaboration will evolve according to your needs. You will end it when you decide to end it.  

 The third advantage of outsourcing is the reduction in the number of various tasks that have to be carried out internally. Indeed, by outsourcing part of your activities, you will be able to better focus on your company’s core business and development of the goods and/or services you offer. Your positive impact on your customers will increase over time.

 The last but not least great asset of outsourcing is innovation. Indeed, by collaborating with an external company, you can stimulate creativity and therefore innovation. In this way, you will be more competitive in the market. Today, service providers are no longer just suppliers. Mature companies give them more credit than before. They trust them more and more. These business partners are sometimes involved in strategic decisions for the company.

The disadvantages of outsourcing:

 One of the main disadvantages of outsourcing is the loss of specific internal skills. Indeed, by entrusting tasks to an external company, you will be forced to separate from a part of your staff either through terminating their contract, by transferring them to your partner or by relocating them to other functions within your company.

The direct consequence of this loss of competence is the risk of losing control of the activity you outsource. Indeed, if you lose too many people capable of performing the tasks that are entrusted to your business partners, you may no longer be able to control them and understand what is going on. To outsource properly, you will always need to keep a minimum of skills in the activity you are delegating, in order to keep a critical eye on what the external company is doing. This know-how will also be useful internally if you want to one day recover the activity you outsourced.

A second disadvantage, or the necessary passage of an outsourcing file, is the time spent on preparing, negotiating and drafting the contract with the organisation to which you will outsource certain activities. Among other things, you will have to think carefully about how to stop this commercial practice in the event of a divorce. An outsourcing contract can be compared to a marriage contract; in the event of divorce, you should have foreseen the procedures to end the relationship without too much damage. Other very important elements of the contract will have to be carefully thought out. I will elaborate on these in a future article.

A third disadvantage may arise after a few years of a business relationship with your outsourcing partner. Imprisonment! This would be the result of a certain habit established in your working relationship, a routine that would prevent you from questioning yourself. Or more serious, a technical dependency that would have been created over the years with your partner, making it difficult or impossible to break the contract without jeopardizing your daily business…

The last big potential disadvantage of an outsourcing case is the communication problems with your partners. They can make your relationship much more complex if you are not prepared for them. This may be due to cultural differences, a different appetite for risk, or simply a difficult accent to understand on both sides. Especially when one (or both) parties use a language that is not their mother tongue. When the intensive use of video or telephone communication makes it more difficult to understand the other party.

In conclusion:

It is not easy to implement a large-scale outsourcing project. But robust techniques exist and can guarantee you a resounding success in this exciting adventure, provided they are well applied.