Both micro entrepreneurs and managers in large companies can count on outsourcing processes for their companies. This means that anyone who has a business, company or SME can choose to hire an additional service without any impediment.

For this reason, different companies, from the smallest to the multinationals, are becoming more involved every day in making the decision to outsource, based not only on the reduction of labour or production costs but also on the possibility that the change generates added value.

Before outsourcing, it is necessary to identify if it is worth doing so, mainly with regard to the volume of work and the costs of implementing the service; whether its software, product packaging, or the need to access specialised labelling machine technology, the case for outsourcing needs to be carefully analysed prior to making a decision.

Below, are two key points to reflect on before making a decision as important as the one to outsource a task or process of the company to a third party.

Do not make the decision just thinking about the cost!

Most modern and competitive organisations move to outsourcing because they are pursuing quality improvements.

Today’s customers have become so demanding, that in the end what matters most is what is delivered, and how quickly, and not how the company does it. In practice, what should prevail is customer satisfaction and the achievement of business objectives.

This is summarised in the motto of the well-known Gucci brand: “Quality is remembered for a long time after the price has been forgotten”.

Your main focus should be innovation

Before outsourcing, managers should think about the following: if I make the decision, I must analyse what other benefits it can bring my company in the medium and long-term.

It is important to evaluate what differentiating resources a potential outsourced service provider can offer in terms of boosting the business.

Based on the above points, the key for any company is to make the decision to outsource their processes based on multiple criteria, and always involving all departments.

In this way, the alternatives will be evaluated from different perspectives and not only from the reduction of costs and/or operational improvements.

The advantages and disadvantages of outsourcing

Advantages:

1. General cost reduction: if we observe this advantage from a physical/practical perspective, such as reducing the amount of equipment and staff required, we will see that it immediately impacts costs such as those associated with electricity and physical space.

In addition, companies that work with outsourced services can count on the benefits of a group of specialists in the field that provide excellent services, so that companies also save on having to hire in-house experts or managers to oversee the function or process.

2. Better competition: only outsourcing allows SMEs to access efficient and advanced technology and processes. In this way, the competitiveness gap between larger companies is significantly reduced.

3. Control of outsourced activity on behalf of the contracted company: another benefit of having outsourced services, is that companies will not have to invest in infrastructure, nor should they be concerned about the correct implementation and maintenance of the service, both of which imply a large capital investment.

Disadvantages:

  • Risk of loss of management control and administration of the process outsourced.
  • Possible communication problems with the service provider.
  • Labour, legal and tax problems related to the contracted outsourcing company.
  • Risk of hiring an unqualified company, which could tarnish the image and reputation.

Outsourcing services are justified when the company really needs to have a punctual service, such as final customer service, order management, sales support, IT integrations, etc. Or when it can allow access to services beyond the investment capability of the company at the current time.