The Benefits and Risks of Outsourcing
A growing number of companies are now moving towards the adoption of the tool of outsourcing (contracting out their tasks to external service providers). The positive consequences in the short and long term – recognized and identified to date are quite important. This article presents a general overview on outsourcing risks and benefits.
Regarding the benefits, outsourcing allows the company:
- Outsourcing helps business owners to focus on "core business" since it decrees the number of activities directly managed by you, without having to invest in secondary activities which, moreover, to achieve absolute levels of competitiveness, would require substantial investment, however, not justified by the results adjusted proportionately.
- It helps you to reduce costs because the company relies on a specialized partner that has as its main business activity that the company outsources. To transform fixed costs into variable costs, since the costs of personnel and equipment (depreciation) are involved so shall be borne outside.
- To have more flexibility, ie a greater ability to cope with sudden changes in sales volume, as the operator, thanks to its specific organization, is able to compensate for the peaks of a customer with other discrepancy to seasonality.
- To improve the level of service through the use of specialized operators.
- To enhance the personal, as no longer engaged in routine tasks, can focus more on the focal aspects of its activities, improving the professionalismism reasonably.
- To improve the quality of services and products provided, as the provider is to add in the "basket" of suppliers to whom it is addressed, only those companies that provide the highest quality standards: this is also important to refer to a vendor proven experience and professionalism.
The main risk, however, are either:
- The motivation of the staff, following the gradual dismantling of the internal structure.
- Often possibility of opportunistic behavior by the service provider, due to the highly vulnerable by the latter company.
- The difficulty of controlling the level of service offered to customers, due to the need for an adequate system of performance measurement and supplier's internal interface of a company possessing the skills necessary.
- The losses of specific know how, if the person to be absorbed by the service provider or in any case be transferred to another business area.
- The loss of direct contact with the customer.
Make the decision whether or not a program of outsourcing should not stop simply examine the potential benefits or risks associated with that choice, but understands careful analysis of administrative and organizational implications that follow from them.
First, the company must be able to manage organizational change during the transition period: in fact many cases in which important organizational innovations introduced by the company of ambitious plans for change and have since proved to be unsuccessful because of strong internal resistance is the inability to build consensus through the active involvement of the entire corporate structure.
During this transition phase is critical to the way in which they released information about the decisions made at the top of the company and the communication of any changes not yet sure that could create a climate of instability that should be at the expense of productivity.
Another aspect to consider concerns the problem of human resource management: it is inevitable that many employees (especially those directly affected are part of the function or service sold out) are unhappy with the solution, therefore, appropriate systems must be planned in advance to encourage people to accept change, not forgetting the way in which to conduct negotiations with the unions.
The outsourcing decisions also require a change in cultural: it is vital to recognize the role of the supplier partners, which include not only put together the complementary capabilities of each party (cooperation), but also establish a relationship based on trust good faith and mutual respect.
The set of relationships with the supplier according to this logic requires the cooperative ensuring proper identification of the supplier: in addition to the current performance of the supplier, must be able to assess the compatibility of the evolutionary dynamics of the supplier with the future needs of the client.
Last but not least important implication is the need to have adequate systems to monitor and control performance of the supplier, useful in the maintenance phase of the report: these systems are able to evaluate the deviations of the service offered by the supplier compared to the standard established by contract and to decide on possible corrective actions.