If you haven’t already noticed, many business organizations today are moving some of their internal functions, processes, responsibilities, and activities to external service providers. This strategy is called outsourcing. It has gained popularity since the last decade.

This industry occurs when contract agreements are negotiated and sealed with a supplier who assumes certain responsibilities in the company. These processes and responsibilities include production processes, human resources, quality control, customer service, key asset management, and other business functions.

It can be a temporary or permanent fix to close certain gaps, acquire better systems at a lower cost, and improve production. Most often, the business functions or aspects that are typically outsourced are: customer service centers, information technology, accounting and payroll, human resources, manufacturing, facilities management, legal services, and marketing research.

Why do entrepreneurs and businessmen outsource?
One of the frequent reasons for outsourcing is to reduce the overall costs of the organization. This transfer of secondary tasks also allows organizations to focus on their core business and unleash a competitive advantage over their competitors. Such initiative on the part of entrepreneurs requires a careful study of the potential areas or aspects of the business. In this way, they will be able to determine which part or if all aspects should be outsourced and consequently discover the pros and cons of outsourcing.

In addition to the reasons mentioned above, one of the factors that drive companies to outsource is the significant cost savings. Most of the time, employers spend a lot of money on employee compensation, creating work spaces and facilities, and other human and technological purposes.

Additionally, the business process provides a way for organizations to perform efficient operations. It will be particularly useful, especially if these are provided by vendors with specific specializations. This results in higher quality and faster turnaround time for producing products and services.

Advantages and Disadvantages: Identified
Understanding the pros and cons of outsourcing can help business owners not only be aware of the pros, but also be wary of the cons.

It’s really a difficult move. It could mean job losses and employee layoffs. This can create a negative impact or perception if done without consideration. It can also cause customer service issues if the service is outsourced to an incompetent or unreliable provider.

Also, doing it in a different country or people who speak a different language can cause or trigger communication problems. If customers are dealing with someone with a strong accent, for example, it will cause communication problems that can affect customers’ perception of the company.

Their destinations are countries that offer cheaper labor. This means reduced expenses related to labor and infrastructure.

One problem with this system is that the service provider’s employees may not possess the same level of skills, knowledge and motivation as internal staff. Additionally, contract workers may not have the same passion for the job as regular employees. Such a situation will certainly affect the productivity of the workforce in one way or another.

Dealing with the pros and cons of outsourcing requires addressing legal compliance and system security issues, especially when sensitive information is accessed through information technology functions.