There are a number of advantages and disadvantages to
outsourcing. Before outsourcing you should give
careful consideration to them.
Advantages:
Access to Experts:
Outsourcing gives you
access to highly skilled individuals who are experts in
their field. These experts have been doing the task
for some time and are well versed in the latest techniques
and technology to get the task done more efficiently.
They are also knowledgeable of what's happening in the
industry and can help your small business by sharing this
knowledge and experience with you.
Cost:
Cost is a key factor for
any small business. Outsourcing a function can
significantly reduce cost. For example, if you
outsource production of item that is complicated to
manufacture it means that you don't have to come up with the
upfront cost of setting up the manufacturing process that
will be required to do the task. Outsourcing personnel
means that you're not saddled with the full cost of payroll
management.
Legal:
Outsourcing some tasks can
shift the legal burden away from your small business to the
outsourced organization. If you chose to outsource
employees the legal burden that could result from sexual
assault lawsuits, firing employees, etc. will be shifted to
the company providing the employees.
Environmental:
The environmental factors
associated with manufacturing can be enough of a deterent to
prevent some small businesses from moving forward.
Having to learn what the environmental regulatory
requirements are and living up to them can be a huge
deterent.
Administrative:
If you hire employees there
is a huge administrative burden that goes with that.
If you perform the order processing task in-house there is a
huge administrative burdent hat goes with fulfilling that
burden. You may not have the staff or time to do this
task efficiently.
Flexibility:
Outsourcing makes your
business more flexible and able to change course and adjust
to market conditions more effectively. As long as you
don't lock your self in to a long term contract with strict
conditions you can always reduce production, reduce staff,
etc. to respond to market conditions.
Disadvantages:
Quality Control:
When you perform a task
under your control you have the ability to conduct the level
of quality control that is deemed necessary. When you
outsource this function is in the hands of someone else.
That organization may not live up to your strict standards
of quality control. You may have to implement another
level of verification in order to get the level of quality
control that is satisfactory.
Hidden Costs:
Hidden cost can make
outsourcing a disadvantage. These costs can range be
fees you have to pay for storage of your finished product if
it is not shipped from the manufacturer within a certain
timeframe; it could also be a fee that you have to pay if
you don't order a certain amount of the product within
certain timeframes. You have to read the contract
carefully and avoid signing any contract with hidden costs.
Exposing Sensitive
Data:
When you outsource you have
to share sensitive data with another organization. If
you outsource food processing you have to share the secret
ingredients so that they can do it right. If you're
outsourcing network security you have to share sensitive
network formation and give an outside entity access to your
network. If you're outsourcing the manufacturing of an
item you have to provide details on the components and how
the item is assembled.
