Offshoring and outsourcing - advantages and disadvantages

Offshoring allows business owners to focus on strategising business growth as it takes off tasks like accounting and marketing from their hands ... Home/Sales/Offshoringandoutsourcing-advantagesanddisadvantages Offshoringandoutsourcing-advantagesanddisadvantages GinoLisondra 04October2017 4minutereadShare Lookingtoexpandyourbusinesswithouttheaddedcosts?Offshoringandoutsourcingmightbethebestforyou,butbesuretoweighuptheprosandconsbeforedecidingonwhichone(ifany)bestsuitsyourbusinessneeds. Theterms“offshoring”and“outsourcing”havebeen,moreoftenthannot,usedinterchangeablyinrecentyears.Thisisbecausesomeoftheaspectsofeachoftheseprocessesarepresentintheotherandvice-versa.Let’sidentifyoneoftheprocessesfromtheotherbeforeproceedingwiththeirrisksandbenefits. Offshoringhappenswhenyourelocatework—theproductionofproductsand/orservices—toadifferentcountry.Outsourcing,ontheotherhand,mayormaynotinvolveanoverseaslocation,butsimplycontractingworkouttoanexternalorganisation. Benefitsofoffshoring Businessesthatchoosetogointooffshoringwilldefinitelyreapbothshort-termandlong-termbenefits.Offshoringallowsbusinessownerstofocusonstrategisingbusinessgrowthasittakesofftaskslikeaccountingandmarketingfromtheirhandswithoutworryingaboutthepossibilityofadeclineinthequalityofwork.  Disadvantagesofoffshoring Offshoringalsohasitsdisadvantages,withthemostprominentonebeingexposingthebusinesstotheriskofadatabreachoracyberattack.Choosingtherightkindofoutsourcingagencyisalsoveryimportantsincefailingtodosocouldcausethebusinesstofalltraptohiddencostsandevenadropincustomerengagement.  Someofthebenefitstooffshoringandoutsourcing workprocessesincludethefollowing: Lowercosts Focusonbusinessdevelopment Attainflexibilityandbusinessexpansion Lowerrisks Exercisemorecontrol Someoftheirchallenges include: Theriskofexposingconfidentialdataand/orinformation Calibrationandsynchronisation Covertcosts Thelackofcustomerfocusandengagement Lowercosts Lateststatisticsrevealcompaniessavearound30to50percentcomparedtothecostofAustralian-basedemployeesforsubstantiallythesamelevelofperformanceandskills. Thereisalsoagreateravailabilityofskilledandexperiencedemployeesfordifferentrolesandpositionsabroad.Youcanalsosaveonemployeesalariesandotherlabour-relatedexpensessincethecostoflivingincountrieswhereyououtsourceoroffshoretendtobemuchlower. Incertaincircumstances,offshoringandoutsourcingeliminaterecruitmentcostsaltogether.Yourthirdpartyserviceprovideralreadyhasthenecessaryexpertiseandexperiencetogetthejobdone. Itwillalsoberesponsibleforitsowncostofoperations.Ontheotherhand,youwillneedtoinvestinboththehiringprocessandinfrastructurewhenyoudecidetostartanin-housedepartmentfromscratch.Yourthirdpartyvendorwon’tneedtoaskadditionaltrainingexpensesfromyou,too. Focusonbusinessdevelopment Outsourcingandoffshoringenableyoutofreeupyourallottedlabourfundandreinvestitinsteadintoyourbusiness.Thiswillallowyoutoexpandyourservicesandofferings.Simply,you’renowgrowingyourbusiness,insteadofjustspendingforit. Theidealsofglobalisationandthefreetradehavegivenrisetoboththeoffshoringandoutsourcingprocesses.Companiessaythatbothprocessesmakesense—whenaproductorservicecanbeproducedatamuchlowercostelsewhere,itdoesmakesensetooffshoreoroutsourcesaidproductorservicethanproduceitlocallyorwithinyourcompany. Attainflexibilityandbusinessexpansion Itisnowpossibleforyoutohaveyourbusinessmanaged16,evenupto24hours.Timezonedifferentialsmakewayforgreaterflexibility,thankstooffshoringandoutsourcing. Andsincetheseprocessesreduce,ifnotterminate,hiringcosts,youenableyourcompanytoquicklyexpandandcontractstaffelsewhere,dependingonyourbusinessneeds. Lowerrisks Yourteamsacrossmultiplelocationsnotonlyprovideyourcompanyspecialisedservices,butalsoenableyoutoreducetherisksofworklags,insufficientcustomerengagementandcommunication,andsimilarchallenges. Adjustedworkshiftsensurethatyourbusinessneedsareattendedtoeveryhouroftheday,everyday,bythemostsuitableemployeesavailable. Exercisemorecontrol Offshoringandoutsourcingalsostrengthenandexpandyourcontrolonoperationsandproductionbyallowingyoutoformadedicatedcoregroupofstafftoworkandfocusonyourcompanyonly. Contrarytothebeliefthattheytakeawayyourcontrolofyourbusiness,offshoringandoutsourcingactuallyenableyoutosophisticateyourprocesses,byestablishingyourcontrolonallaspectsofeverybusinessparticulars.Asthesolesourceofdirection,youtrainyourstaffandseetoitthateverythingisdoneandrolledoutthewayyouwantit. Thisleadstomoreproductivityandsenseofaccountabilityfromeachmemberofyourcoregroupofstaff,allwhileyou’recertainthatyourotherbusinessneedsareattendedtobyselectteamsofthehighestcalibre.Readmoreonoffshoringbenefitshere. However,beforeyoufinallydecideonoutsourcingandoffshoring,youalsoneedtoaccountfortherisksandchallengestheymaypose. Theriskofexposingconfidentialdataand/orinformation Whenworkisoutsourcedoroffshored,especiallyHR(humanresource)andrelatedservices,thereisalwaystheriskofexposingconfidentialandsensitiveinformationtoathirdpartyserviceprovider,besidesthealreadyobviousdisadvantagesofoutsourcingpayrollandHR. Besureto onlycontractwithatrustedthirdpartyfirmandbecertainabouttheextentofthecompanyinformationyouarewillingtoshare. Calibrationandsynchronisation Ensuringyouselectthemosttrustworthyandcompetentoutsourcingand/oroffshoringpartnercannotbeoveremphasised. Thisisbecausewhenyourthirdpartyserviceproviderdoesn’tdeliver,youmayencounterdeliverylagsorstretcheddeliverytimeschedules,sub-standardqualityoutput,andinappropriateresponsibilitycategorisation,whichmayprovemorecostlyintheend. Covertcosts Lowercostiscertainlyoneofthebiggestreasonswhycompaniesoutsourceandoffshore.Itwillthendefeatthepurposeofdecidingontheseprocessesifyourcontractinvolveshiddencostsyouareunawareof. Thus,itisimportanttoseekprofessionaladvicefromyouraccountantand/orlawyer,toanteupyourpreparationbeforesigningthatcontractandwritingthatcheck. Thelackofcustomerfocusandengagement Youroutsourcingandoffshoringpartnermayalsobecateringtoseveralorganisationsatatime.Thismeansyouarenottheonlybusinessitservices. Whenthishappens,beclearwithwhatyouwantfromthem,includingthespecificsofhoweachproductand/orserviceistobeproducedanddelivered.Youcandoduediligencehere,too. Beforeenteringintoacontract,makesureyouhavedonethenecessaryresearchandinvestigationintothetrustworthinessandcompetenceofyourthirdpartyvendor. Tags: howto Offshoringandoutsourcing-advantagesanddisadvantages GinoLisondra LastUpdated:09December2020 Published:04October2017 GinoLisondra LeaveaComment Previous Next trending Offshoringandoutsourcing-advantagesanddisadvantages Benefitsofafamily-ownedbusiness Thedifferencebetweennetpresentvalueanddiscountedcashflow Canyouwriteoffacarpurchaseonyourtaxes? 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