Outsourcing is a controversial method. We have all heard many different opinions about it. Some are in favor and others against this practice. Here, we present you all you need to know about outsourcing. In addition, we share some tips for conducting an effective outsourcing strategy.
1. What is outsourcing ?
Outsourcing is the act of entrusting one or more (secondary) tasks to another entity. It is thus a question of having an external partner produce a function of your company.
This transfer to an external company is done under a contract. Indeed, the ordering company remains responsible for the tasks entrusted to the partner company. They have agreed on a set of specifications. There needs to be a trusting relationship between the two companies to ensure that the work is done in a quality manner.
There are several types of outsourcing :
- Onshore outsourcing: this is outsourcing within the same country
- Offshore outsourcing: this is an outsourcing to a company in a different country
2. The challenges of outsourcing
Outsourcing must be based on a real strategy to be effective. We present you the advantages of outsourcing and the disadvantages to be taken into account as well.
The benefits of an outsourcing strategy
It is undeniable that outsourcing offers several advantages to those who practice it.
- Focus on your core business
Transferring secondary tasks allows the company to refocus on its core business, to devote itself fully to it. This encourages the internal development of new strategies (innovation, organization). As a result, the company becomes more efficient.
- Reduction of production costs
Transferring the business to an external partner allows the company to reduce and control its costs. Indeed, fixed costs are reduced and therefore you gain in flexibility and productivity.
- Quality gain
When you choose a good partner who specializes in the task at hand, you benefit from their expertise. This allows you to increase your quality on this function without having to manage it internally. Moreover, it is a time saver, your internal resources are freed and can be allocated to other tasks, called main tasks.
The disadvantages of an outsourcing strategy
However, it is important to be aware of the disadvantages of outsourcing.
- Increased transaction costs
They are the costs associated with finding the right external partner or negotiating the contract. As well as the expenses related to the control and the follow-up of the work carried out by the external company.
- Dependence on the partner
Make sure you don't lose your expertise to the point that you are no longer able to perform this or these tasks without going through the external company you use.
- The quality of the service
If the quality of the work is questionable, your reputation may be damaged. It is preferable to take the time to choose a partner who is a specialist in his field before outsourcing.
3. Why should you outsource ?
When production costs are higher than (anticipated) transaction costs, then outsourcing is not only legitimate but also advisable.
Firstly, the subcontracting seemed to concern only the tertiary sector of the company (catering, security, etc.). Now it also affects the entire functions of the company such as:
- Human resources: payroll management, recruitment and staff training
- The sales department: after-sales service, processing e-mails, making appointments, prospecting (phoning),
- Digital marketing service: Community management (to an agency or a freelance)
- IT: maintenance,
- Logistics: order tracking, delivery,
Second, the outsourcing strategy is not to be taken lightly. You need to weigh the pros and cons and be sure that this is the best option for you. This is not a decision to be made hastily, it requires thought and organization.
Our experts give you key tips for outsourcing :
- Define the specifications,
- Analyze and anticipate potential costs,
- Strategically select the function(s) to be outsourced
- Think about the ideal partner and specialist
- Know the costs associated with internal recruitment (to ensure that outsourcing is more cost-effective)
- Anticipate the needs (don't wait until the rush period, you risk botching your strategy)
Are you interested in outsourcing ? If you are looking for a trusted partner, expert in its field, please visit our page dedicated to outsourcing & TMA.
Contact us to discuss your outsourcing project.