Some organizations are able to keep everything that needs to get done underneath their own roof. Sometimes, however, there is a need that must be fulfilled right now that a company can’t do because there isn’t the skills or experience necessary to do so in their employee base. When this happens, global outsourcing becomes a possibility to be considered. Outsourcing sends those tasks or needs to a third party to be accomplished through contract terms.
Global outsourcing tends to have a poor reputation in some circles because it is seen as sending jobs to foreign countries. Others see it as a positive because companies can still accomplish their goals even if they don’t have the internal resources that are needed. What are the real pros and cons of global outsourcing?
The Pros of Global Outsourcing?
1. It provides a higher level of expertise to the final product.
If internal resources don’t have the same levels of expertise for a needed task that a third party has, then global outsourcing allows a business to add a higher level of expertise to the final outcome. This can be through the use of equipment, technical expertise, or administrative expertise just to name certain common tasks that are outsourced by companies today.
2. It allows a business to begin focusing on their core processes.
When there is uncertainty within an organization, the natural tendency is to commit more resources to resolve that uncertainty. By adopting a system of global outsourcing, an organization can keep those resources where they are need most: with their core processes. The end result is a strengthened business instead of a weakened business.
3. It eliminates a certain level of risk.
Global outsourcing allows agencies to distribute their risks in certain areas so that their liabilities are limited. A failure from a third party to provide could certainly harm an organization’s reputation, but that organization can be financially recompensed for that failure because of the third party errors. Each outsourced vendor as niche expertise that also lessens the chances of an error occurring, which further eliminates risk factors at certain levels.
4. It reduces costs.
Outsourcing globally may have certain expenses, but those expenses are typically lower in a wide variety of ways. There’s the cost of recruiting internal expertise that is eliminated. Global wages and standards may be lower in foreign nations than domestically. Training costs are eliminated because outsourcing goes to experts within the industry already.
The Cons of Global Outsourcing
1. It can expose sensitive information or intellectual properties to the global environment.
If payroll services are outsourced globally, for example, then the confidential information that employees are forced to share to be paid can become exposed and potentially used by individuals not associated with the outsourcing relationship. This places company data and individual data at risk for a breach more often because of the regular communication that happens with global outsourcing.
2. Outsourcing contracts may perform with a lack of focus.
There is no getting around the fact that companies which accept outsourcing contracts are just as concerned about their bottom line as the company which needs outsourcing services performed. Global outsourcing may involve several levels of subsourcing that may be outside of the initiating company’s control. This means there may be a lack of quality assurance involved and a greater chance for a data breach to occur.
3. There may be hidden costs involved that aren’t considered until they need to be paid.
Outsourcing tasks to global organizations may have certain taxes, fees, tariffs, and other hidden financial consequences that are not even known about until they come due. Before any global outsourcing, an organization must thoroughly research their planned contract relationship through law and through the fine print of the contract to avoid unnecessary costs.
4. It can be difficult to synchronize deliveries.
One of the most common issues with outsourcing is the fact that work doesn’t always get delivered on time. Contracts can be terminated for late delivery in many instances, but that also means the work still needs to get done. There is no real way to regulate the internal factors that are in play during an outsourcing agreement, making it difficult to come up with consistent deliveries at times.
These global outsourcing pros and cons show that companies can save money by contracting out services, but it may come with a different price tag. Before global outsourcing occurs, it is important to perform due diligence on the organization and the jurisdiction to make sure there aren’t any unpleasant surprises which may occur. In doing so, the best possible and profitable relationships can be developed.