Outsourcing is a practice where certain business functions that could typically be performed in-house are handled instead by a third party. Outsourcing has been commonly used in business since the 1990s.

What are the Advantages of Outsourcing?

Outsourcing offers these advantages:

  • It provides access to talent, equipment, and technology that may be beyond the ability of an enterprise to afford internally. Third-party providers are typically those who specialize in their field, so they can perform the desired work more quickly and at a higher quality output than someone who does that work part-time.
  • Using a third party can allow business executives to focus on core processes rather than supportive processes.
  • Giving responsibilities to an outsourced vendor enables a business to shift some risk-mitigating factors to the third party.
  • Outsourcing reduces the need to hire full-time personnel in-house so it reduces recruitment and employment costs.

What are the Disadvantages of Outsourcing?

The disadvantages of outsourcing are:

  • The risk of exposing some confidential data.
  • The challenges of synchronizing the deliverables to meet required timetables.
  • The potential issue of reducing a company’s sharp focus on its customers and/or vendors.

What are the Most Commonly Outsourced Business Functions?

Outsourcing is broadly used across organizations and is commonly applied in the following areas:

  • Information systems and technology including website design and maintenance.
  • Human resources; especially payroll and recruitment.
  • Legal services.
  • Marketing, including content development and social media management.
  • Manufacturing.
  • Logistics.
  • Customer support.

What are the Requirements for Successful Outsourcing?

Successful outsourcing requires significantly more than saying, “let someone else do it.” Rather, it requires:

  • Establishing clear goals and a detailed plan for accomplishing the outsourced work.
  • Careful selection of vendors to make sure they have the understanding, focus, skill, and trustworthiness to accomplish the work.
  • Financial justification and budget management.
  • Managing the vendor relationship skillfully.
  • Open communication with all stakeholders.

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