Outsourcing is the process by which activities previously
carried out internally are subcontracted to external suppliers.
Strategic advantages of outsourcing
(1)Cost Savings
There can be significant cost savings
when a business function is outsourced. Various type of costs like-employee compensation costs, office space expenses can be eliminated through outsourcing.
(2)Focus on Core Business
Outsourcing allows organization to
focus on their expertise and core business.
(3)Improved Quality
Improved quality can be achieved by
using vendors with more expertise and more specialized processes.
(4)Customer Satisfaction
The advantage of having a vendor
contract is they are bound to certain levels of service and quality.
(5)Operational Efficiency
Outsourcing gives an organization
exposure to vendor specialized systems. Specialization provides more
efficiency that allows for a quicker turnaround time and higher levels of
quality.
Pitfalls of outsourcing
(1)Quality
Risk
Outsourcing
can expose an organization to potential risks and legal exposure.
(2)Quality
Service
Unless a
contract specifically identifies a measurable process for quality service
reporting, there could be a poor service quality experience
(3)Language
Barriers
If a
customer call center is outsourced to a country that speaks a different
language, there may be levels of dissatisfaction for customers dealing with the
language barriers of someone with a strong accent.
(4)Organizational
Knowledge
An
outsourced employee may not have the same understanding and passion for an
organization as a regular employee. An outsourced employee often has the
possibility for resulting in negative customer experience.
(5)Employee
Layoffs
Outsourcing
commonly results in the need to reduce staffing
levels. Unless
it can be planned through attrition, layoffs are inevitable. This is
difficult at best and if not managed appropriately, can have a negative impact
on remaining employees.
