Is off-shoring a fashionable fad or a sensible move?
You might be thinking you can move the service to a different provider or back in-house, allowing for ample leverage to negotiate extensions if needed. Or, you may assume you do not need longer-term protection since you can update the agreements on renegotiation. While either of those might be true in some instances, that shouldn’t be a chance you are willing to take with potentially complex or mission-critical technology services.
Some of the obvious pros and cons, according to this article, are listed below, but are they the realistic?
Advantages of Offshore Outsourcing
- Core activities of the business take center stage. Outsourcing non-core activities, such as administration and back-office operations, helps to put the focus back on the core functions of the business, such as sales and marketing.
- Cost savings: lower cost of operation and labor makes it more attractive to outsource.
- Reduced overhead costs that usually come with running back-end operations.
- By increasing productivity and efficiency, a business can be more successful and better-prepared for market challenges.
- Flexibility in staffing and manpower management. Since the service provider is responsible for managing the workforce, you save costs and can also pick the best people to run your core functions.
- Offshore outsourcing gives businesses the ability to develop new competencies and skill-sets that can be used as a competitive advantage.
Disadvantages of Offshore Outsourcing
- Risk of losing sensitive data and the loss of confidentiality. It is important, therefore, to have checks in place to avoid data loss.
- Losing management control of business functions means that you may no longer be able to control operations and deliverables of activities that you outsource.
- Problems with quality can arise if the outsourcing provider doesn’t have proper processes and/or is inexperienced in working in an outsourcing relationship.
- Since the outsourcing provider may work with other customers, they might not give their undevided time and attention to a single company.
- Hidden costs and legal problems may arise if the outsourcing terms and conditions are not clearly defined.
Over the years I have both witnessed and helped – via interim managers – a number of clients embark on the outsourcing journey only to bring the services back in-house at a later date.
As an interim manager have you worked on an outsourcing programme. If so, what are your thoughts on the success, cost and time benefits gained by the organisation?
Antony Flagg is the Senior Consultant of Financial & Professional Services at Interim Partners.