Outsourcing is a popular way to maintain the everyday operations of a business while saving money, but some companies wonder if outsourcing is reasonable based on the size of the company. The information below explains how a company can successfully outsource while avoiding the risks commonly associated with the business practice.
Small Business Outsourcing
Small businesses can benefit from outsourcing because cutting costs means that there is more cash flow circulating in the business. An increase in cash flow can attract investors and lead to expansion. AllBusiness.com points out that increased productivity and an ability to work on more than one project simultaneously are two benefits that small businesses should seriously consider when deciding whether outsourcing is the right choice.
It is common for small businesses to struggle to match the amenities that larger companies have available in-house, but outsourcing is a way that small businesses can get on more level footing. Outsourcing may even be the edge needed to allow a small business to successfully compete.
Large Business Outsourcing
Outsourcing is most beneficial to large businesses in the area of expanding global operations. Some large companies may become stalled in growth because operations and distribution are limited to the United States. Outsourcing gives the benefits of cost savings and increased productivity while offering the added benefit of expanding the business internationally.
CIO reports that effectiveness of companies engaging in outsourcing is significantly higher in several different categories as compared with companies that do not choose to outsource.
Examples of Success in Outsourcing
A list of success stories in outsourcing reveals that several large companies have been able to effectively enter into a partnership with a third party.
Proctor & Gamble allows its IT operations to be outsourced to Cinergy Solutions, Inc. in an attempt to free up labor hours and financial resources for other departments. This has allowed the company to focus time and money on projects that are directly related to its core business.
Risks of Outsourcing
As Ravi Shukla of McMillan LLP points out, the benefits of outsourcing do not come without the possibility of risks. The biggest risks tend to be observed when offshore outsourcing is done. Differences in business laws in international locations may mean that security is not as tight as it would be if information was being stored within the United States. This can leave company and client information open to foul play.
If the outsourcing activities involve international vendors, there is always a risk that these vendors will fail to deliver goods. A failure to receive goods means that the company’s clients are left without products and may become disgruntled enough to seek a different company with which to do business.
One final risk to consider is a loss in translation. It could be difficult for the company to convey needs to a third party, or there may even be cultural barriers that interrupt the flow of business.
How to Find an Outsourcing Partner
IDS Logic highlights the importance of asking the right questions when looking for an outsourcing partner. One important question to ask is whether the company has references. Verifiable references are essential for a successful outsourcing experience. Make sure that the partner is also reliable in promptly answering inquiries online and on the phone, and ask for details regarding the security of any information transmitted to the partner.
