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Quality of service - Because your company is
outsourcer's customer, you will likely experience a "can-do attitude," which may not always be exhibited by an in-house staff.
More capital funds - Outsourcing reduces need to invest capital in non-core business functions, thereby freeing capital to invest in profit-making aspects of business.
State-of-the-art technology - Outsourcers have to spend time and money on most current equipment and on employee training to remain competitive. By outsourcing certain areas, you are assured of receiving most efficient services and latest technological advances within that particular function.
Price stability - By signing a contract to outsource, you will likely be able to obtain stable pricing, eliminating future need to shop around. Stable pricing allows company to budget operating expenses and capital purchases more accurately, while potentially preventing likelihood of surprise expenses.
New business partners - Outsourcers clearly wish to be viewed as your business partner. And as a business partner, they share in desire to keep your company operating at its maximum potential. Through this business partner arrangement, outsourcers are eager to introduce you to other outsourcers to assist in that goal.
More time to focus on core business activities - You cannot overlook this intangible benefit of outsourcing. If a company is to be successful and profitable, management is needed to spend time planning and directing company's business strategies and not wasting time worrying about managing certain administrative or ancillary functions.
Potential Drawbacks
As with every new system and procedure, you have to take good with bad. Critics argue that outsourcing creates too much loss of control, less flexibility, questionable savings and risk of over dependence on too few vendors. Owners of family and privately owned businesses should understand that initiating an outsourcing arrangement takes considerable management time. Finding and selecting right outsourcing company can take many months. And outsourcing companies need to be given overall directives and guidelines for what company wants done, and therefore, some level of supervision by management will ultimately be needed. Also, if an outsourcer is replacing a function that has been historically done within company, layoffs could very possibly affect employee morale and may cause talented staff in other core areas to leave for fear of job security. In addition, be cautious not to completely eliminate internal ability to provide basic product or service you offer. For example, if you are a manufacturer and you have outsourced assembly of your product, be sure you can still provide a sample of a specialty order in-house if asked to by a customer. A delay of a product sample could cost you customer's business.
One of biggest complaints by companies that have outsourced is that there has been a mismatch between expectations and reality. When an outsourcer is marketing its services there is usually much enthusiasm and talent dedicated to solving problems that were defined at outset. However, once contract is signed, outsourcer brings in its implementation team, which often lacks same level of enthusiasm that sales and marketing team had. Due diligence is necessary when beginning any new business relationships. It is best to get recommendations from current customers of outsourcer or other reliable sources in your industry.
Careful Selection Is Key
By being aware of these drawbacks at start of outsourcing process, you can mitigate many of these and build outsourcing relationships that benefit your business. The key to successful outsourcing is careful selection of both functions you outsource and vendors you choose to supply them.
About Paul Rich Siegel Rich Division - Rothstein Kass
Paul Rich is a business consultant and specializes in assisting closely-held and family owned businesses in structuring and negotiating mergers and acquisitions, securing financing, rendering IPOs and private placement advisory services, assisting with succession planning and providing profit-enhancement business planning and executive coaching, among other hot button areas for small business owners.
