Business Outsourcing Isn’t Always The Solution

Business Outsourcing Isn’t Always The Solution

Globalization and the growing interconnectivity of the business world have enabled the outsourcing industry to grow and flourish, especially given the impactful benefits it can provide in terms of cost-competitiveness and access to diverse talent. As a result, we are seeing more and more companies make their way up the corporate ladder, leveraging their strengths and offsetting any potential weak point by partnering with third-party service providers that would’ve otherwise been beyond their reach.

However, far too many entrepreneurs and business owners have become overdependent on outsourcing business tasks, and because of the disruptive changes brought on by the new normal, the once praised for benefits carry significant risks. Therefore, it’s completely wrong to assume the business outsourcing is a one size fits all solution due to the adverse effects of spreading yourself too thin, and to prove this point, we will be going over the inherent drawbacks of outsourcing in today’s business climate.

Less Control Exposes A Firm To Unnecessary Risks

Less control and influence over your business operations have always been a gap experienced with business outsourcing, but due to the increased constraints introduced by the global pandemic, it has magnified the exposure of firms to unnecessary risks. Yes, there’s no denying that the economic outlook is more optimistic now than it was a year ago. Still, we must always practice prudence and prepare for the worst-case scenarios to protect the integrity and sustainability of the company.

  • Potential Security Threats And Disaster Recovery: Firstly, outsourcing specific business tasks and key operations also means creating new entry points into your company’s central information system. And while you can guarantee that you’ve invested sufficient resources into security and disaster recovery, the same can’t be said for outsourcing companies. There will always be a level of doubt, and because of the financial risks in today’s economy, some businesses may have forgone increased security to stay operational.
  • Reduced Quality Assurance And Management: In addition to security and monitoring, you will also run into issues with reduced quality assurance and management on the part of the outsourcing company. It’s only natural that your core business will place quality assurance as a top priority, but we can’t confirm that the same quality over quantity policy is followed and reinforced by your outsourced partners. As a result, your products and services might be intertwined with substandard results, which will hurt your brand image and accountability.
  • Misunderstanding And Conflict Of Interests: Last but not least, misunderstanding and conflict of interests will always exist, and even though executive decisions from your core company may appear objectively better, the same may not apply to your outsourced partners. And because there’s no immediate and accessible way of observing their operations, there’s the risk of them simply not abiding by new rules and regulations. Of course, this is not meant to downplay the credibility of outsourcing companies, but the threat is real, and it can happen.

people at the office

Limit Your Outsourcing Needs To General Operations

Given the shortfalls of business outsourcing in the new normal, we strongly recommend that you limit any outsourcing needs to general operations alone so that you reduce any untoward exposure to unnecessary risks and threats. We understand that some businesses and firms can only operate when certain business tasks are outsourced, so you’ll want to balance what remains in-house and what you can afford to assign elsewhere.

  • Avoiding Disadvantageous Variable Costs: Some variable costs will always be significantly disadvantageous given the location, business climate, and economic circumstances specific to a region. For example, labor shortage for general services will cause onboarding new talent in certain areas a lot more complicated than others, meaning that the sound decision would be to outsource. And if you find yourself in the same predicament, outsourcing to avoid disadvantageous variable costs will be better.
  • Allocate Resources To Core Operations: Apart from variable costs, if innovation and product development require increased resource allocation to meet new demand, upscale operations, or maintain existing processes, then feel free to offset costs with outsourcing. At the end of the day, your core operations define your business, and your general operations should not impede the progress and sustainability of your overall business objectives. So, if sunk costs rise and trends change, don’t hesitate to adapt.
  • Competitive Risk-Sharing And Analysis: Lastly, it’s common knowledge that businesses must employ risk-averse strategies during volatile market circumstances, but given the current bullish run of the economy and not-so-pleasant financial strongarms, outsourcing for competitive risk-sharing is necessary. The last thing you’d want to happen for your business is to miss the chance of riding the next wave of bullish momentum and consumer influx. So, if the opportunity to promote growth is within your reach, feel free to create more leeway through outsourcing.

Consolidate Essential Business Growth And Development

Overall, despite the expected benefits of business outsourcing, it is in your best interests to exercise caution in outsourcing business tasks because there are drawbacks to doing so in the new normal. So, before you leverage more growth for your restaurant franchise or online retail store with outsourced services, take care to understand the associated risks.