5 Important Factors To Consider Before Deciding On Outsourcing

Either small or large organizations resort to outsourcing their business processes or functions. They outsource most of the business functions or some processes to focus more on the core business aspects.

In fact, one effective way to maintain profitability is through outsourcing. This strategy allows you to streamline costs, improve productivity, and reduce risk factors while implementing flexibility to your business development model. And that’s the reason why global outsourcing has continued over the years.

However, the benefits of outsourcing are not automatic as many would have imagined. A successful outsourcing engagement can be achieved depending on many factors, such as the right service provider. Before adopting an outsourcing model, factors that affect the success of an outsourcing project can also be considered.

What Are The Things You Should Take Into Account?

Before jumping into outsourcing, it is crucial to consider the following factors:

1.    Reputation Of Business

Due to the scrutiny that businesses face, it is vital that they regularly maintain the highest possible standards. Doing so can help preserve their reputation and avoid making the biggest mistake they ever make. It’s also crucial that external processes are regularly maintained to ensure that they meet the highest possible standards. Not taking the necessary process to ensure that your reputation is protected before the outsourcing model begins can be the biggest mistake you make.

For instance, if a call center is outsourced, but the customer service is not as good as it should be, it can easily lead to a backlash from consumers. But, when it is outsourced efficiently, customers rarely notice that they are not speaking to an in-house representative, which is a good sign. And this applied to all external processes. Outsourcing may have lower operating costs, but once the service level drops, the cost of rebuilding your business reputation is much higher than your initial savings.

2. Collaboration and Communication

Unfortunately, outsourcing can also present unique challenges to any organization. For instance, some of the issues that arise when dealing with outsourced support may be caused by the time difference between different time zones. Also, if you are using a provider with different work culture, communication barriers may arise. Regardless of the reasons why you choose to outsource, the communication barriers that may arise are usually due to the differences in culture, language, and time, especially if you decide to outsource in an off-shore location.

So, when you consider outsourcing, important components should be in place to ensure smooth communication and collaboration. Flexibility is an important factor along with reliable communication avenues, which everyone in the organization can reach and communicate with one another easily, either via e-mail, phone, online groups, video conference, and so on.

3. Cost-Efficiency

Most of the time, an increase in profit margins is achieved by taking advantage of the efficiencies of outsourced processes. However, this approach can be very costly if the wrong processes are used. Outsourcing certain tasks, such as payroll management, can help companies lower their costs and increase efficiency.

But, always remember that the business’ core activities must take place in-house as the required knowledge level will be found win-house and should remain at the center of the business. For example, if Google decides to work with a third party for its search algorithm development, it would be risking losing its competitive advantage. This aspect is true for all kinds of businesses, regardless of size and nature.

4. Innovation

Many businesses aspire to transform their offerings and become more innovative, but these goals can be hindered by their internal constraints. Considering outsourcing innovative software development processes can help organizations overcome these constraints. Doing so can allow them to step away from their traditional approaches and develop something new.

When done right, identifying a new market and developing an innovative product or service can be lucrative. Doing so will allow a company to quickly become the industry leader. But, if a business doesn’t do this correctly, it will be left behind in the competition, and that’s how crucial innovation is.

So, the right outsourcing partner can help a company achieve its goals, but it should also be able to adapt to the changes brought about by the business.

5. Pricing Value

Implementing an outsourcing model can lower a business’s operating cost, especially labor. For example, the average rate of an entry-level worker in the India is around $1.50 to $2.20 per hour. 

Assume that labor is kept at 15% of revenues, then the hourly cost of services would be around $10 to $15 per hour. If you try to lower the rate per hour, that result in a raise in labor percentage may be up to 21% of revenues. In order to remain profitable, the outsourcing provider has to make some changes in its operations. So, be reasonable when it comes to negotiating the pricing. Doing so can help avoid getting bogged down in trying to get the lowest possible price.

Bottom Line

These are just a few considerations that every business should take into account when you’re considering outsourcing business functions. Also, these factors will play an important role in helping you decide which outsourcing provider you should rely on in achieving your business goals while maintaining and improving profitability and productivity, which is crucial in any business.

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