Business process outsourcing: advantages and disadvantages

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Business professionals believe that outsourcing, done right, produces fantastic results. But this rule is not relevant for every case. Features of the service, nuances of use, advantages and disadvantages deserve special attention.

Business process outsourcing: advantages and disadvantages

First of all, you should understand the terminology, as the word "outsourcing" in the domestic business sector appeared relatively recently. Literally translated, it means "attracting third-party resources." It is clear from the context that we are talking about attracting human resources to the company's activities in order to improve or maintain the current level of efficiency.

Outsourcing as a business tool is not particularly common in Russia. According to economists, it is too early to draw conclusions, since the potential of this industry is practically not revealed. It can be compared with European and Western countries, where medium and small companies outsource about 80% of internal processes to external management. There are several good arguments for this. But it cannot be said that business outsourcingprocesses promises a solid benefit. We will also talk about the disadvantages of this approach. But first things first.

What does the process look like?

In order to understand the essence of the process, it is necessary to clearly imagine the anatomy of the phenomenon. The use of the services of external specialists belongs to the category of B2B services - the provision of services to companies and private entrepreneurs. Therefore, first of all, the customer company signs an agreement with an outsourcing company. It will indicate the order of cooperation.

Outsourcing services, in fact, are a group of "incoming" specialists. The Contractor may be a legal entity, a private entrepreneur or a specialist who has a different license to conduct commercial activities. For clients of an outsourcing specialist, it is not the form of activity that is important, but the experience of the performer, as well as the potential benefits that he can count on. Objectively, business process outsourcing can provide some significant benefits.

Expert opinion

Commercial activity is interesting because at each stage it provides an opportunity to confirm or refute this or that theory. For example, the chosen method of tax or accounting may be correct and help save money or, conversely, increase costs.

The second outcome is quite likely if the company's accountant or a good adviser to the head "forgot" to take into account a small change in tax legislation. The company must cover the costs. Head being confidentin the fact that its affairs are run by experts, may not be aware of what opportunities are being missed.

The strength of a specialist is proportional to the number of complex tasks that he was able to successfully solve and show concrete results. This requires another condition - the dynamism of the overall processes in the company. Outsourcing services excel in providing such conditions for their specialists, as each client is a new challenge.

As a result, in a short time, specialists gain invaluable experience and already have in their arsenal several ready-made solutions for each critical case.

Speed up processes

Psychologists note the following effect: the fewer duties an employee has, the faster he loses motivation to work, and vice versa. The head can hire a good specialist, assign him a solid salary and social package. But he will be outraged by the fact that very soon the specialist begins to miss the deadlines, show low efficiency and, in general, a negative trend.

The reason is not that the employee is not good enough, but the small amount of work that is not able to create the effect of dynamic growth. At the same time, the same employee, but working in an outsourcing company, simultaneously manages the affairs of several companies and shows success. If a manager contacts this company, the business of his company will also be done quickly, and the salary may turn out to be lower than the content of a full-time employee.

Risk reduction

An important factor in any business is objective analysis and evaluationrisks. In fact, there are few companies where each employee is responsible for the results of their work. The usual practice for companies: if there is success - the issuance of bonuses, failure ends with a reprimand or deprivation of the bonus.

Another situation is when a specialist bears equal responsibility together with the manager, then the efficiency of his work increases greatly. The explanation of such manifestations of cooperation lies more in the plane of psychological sciences than in practical explanations. In any case, the fact that the outsourcing of the company will be justified on this point is indisputable.

Cost reduction

This item is especially relevant for start-ups and small companies. In such offices, the volume of work for one specialist may be small. For example, an entrepreneur cannot do without the services of a lawyer, but hiring a specialist with a law degree and full-time experience can cost him a substantial amount.

Business process outsourcing, in particular, the transfer of some types of work to external management, will help to significantly reduce costs. An entrepreneur can contact a remote employee only for certain work and pay according to its volume.

If we are talking about a medium-sized company, then it can also significantly reduce costs. In such companies, it is usually customary to maintain entire departments in different areas of activity. Usually, after a thorough HR audit, it becomes clear that part of the department can be immediately reduced, and the company only benefits from this. Company outsourcing andsome of its tasks can provide brilliant results at low cost.

Unique Features

There are no limits for business prospects. This phrase will be true and literally. The whole world knows that in some parts of the world labor is valued very dearly, in others it costs a penny. This applies to all types of labor: highly skilled, mental and intellectual.

The Internet has made it possible to combine such conditions. Each of the parties receives its own benefit: a specialist finds a job with decent pay, and an entrepreneur finds a specialist with good qualifications. Business process outsourcing is quite possible over the Internet. Depending on the type of activity, you can organize the work so that the business works around the clock and around the world.

Simplification of labor relations

Using the services of hired workers creates a lot of obligations. To manage this aspect, it becomes necessary to create an HR department. This is a big company problem.

The little ones also have their difficulties. They may or may not have an HR department. But in small teams, as practice shows, it is difficult to maintain subordination. And this has a very negative impact on work efficiency. Personnel in business process outsourcing, in principle, do not have the opportunity to be exposed to the phenomena that usually occur within the company. The essence of all relations here comes down to the terms of the service agreement.

You can safely plan

The division of risks and responsibilities has already been mentioned. Relying on the experience and knowledge of the performers, the entrepreneur can now plan more risky projects and decisions. It is enough just to notify your performers about it. The opportunity to experiment opens up never-before-seen vistas and opportunities for businesses.

Calm and predictability

It's hard to run a business when it causes insomnia, takes away he alth and peace of mind. There will come a time when the entrepreneur will no longer be able to find the strength to continue the business. The function of business process outsourcing is to make running a business as easy as possible.

If a specialist is good, then there is no need to worry about being taken away by competitors. There is no need to check every step with the TC, follow discipline, demand results and achieve them at a high price. All these problems lie on the shoulders of the outsourcing company, which, under the contract, is responsible for its customers.

Flaws

There are also a number of disadvantages that an entrepreneur must take into account. For example:

1. Lack of control. It is about control over the fulfillment of tasks. Such a risk is great when working on outsourcing with other countries. The customer does not know who specifically performs his work, how and what the exact result will be.
2. Information leak. In the course of work, the remote employee will have access to the company's affairs, as well as its important data. In the contract for the provisionservices, security should take a special place. Companies guarantee information security. But it would be useful to ask for additional confidentiality measures to be included in the contract.
3. Dependence on another company. Too close cooperation with another company can put the client's affairs in a dependent position. In order to prevent the concentration of all forces in one extraneous hands, it is recommended to use the services of different companies or slightly reduce the share of outsourcing cases.

What can be outsourced?

Given all the advantages and disadvantages, the question arises as to which business processes should be outsourced and which should not. Today, the following types of business processes are practiced at a distance.

• Accounting.
• Audit services.
• Lawyer services.
• Business process outsourcing in procurement.
• Sales Department.
• PR department.
• Printing processes.
• Cleaning part.
• Movers services.
• Business process outsourcing in advertising.
• Translation services.
• Responsibilities of the HR department.

This is not an exhaustive list of what can be assigned to remote employees. Much depends on the scope of the company and the specifics of the work. Thanks to the wide possibilities of the Internet, you can find any specialist with a narrow focus and at a price that suits both parties.