As you evaluate your choices and decisions in outsourcing different components of your

operations, you will need to consider the advantages of outsourcing. When done for the right
reasons, outsourcing will actually help your company grow and save money. There are other
advantages of outsourcing that go beyond money. Here are the top seven advantages of
outsourcing.
A. Advantage of Outsourcing
1. Focus On Core Activities
In rapid growth periods, the back-office operations of a company will expand alsoThis
expansion may start to consume resources (human and financial) at the expense of the core
activities that have made your company successful. Outsourcing those activities will allow
refocusing on those business activities that are important without sacrificing quality or service
in the back-office.
Example: A company lands a large contract that will significantly increase the volume of
purchasing in a very short period of time; Outsource purchasing.
2. Cost And Efficiency Savings
Outsourcing is a good option when you have back-office functions that are
complicated in nature, but the size of your company is preventing you from performing them
at a consistent and reasonable cost.
Example: A small doctor's office wants to accept a variety of insurance plans. One part-time
person cannot keep up with all the different providers and rules, so the task is outsourced to a
firm specializing in medical billing.
3. Reduced Overhead
Overhead costs of performing a particular back-office function are extremely high. Consider
outsourcing those functions which can be moved easily.
Example: Growth has resulted in an increased need for office space. The current location is
very expensive, and there is no room to expand.
Outsource some simple operations in order to reduce the need for office space. For example,
outbound telemarketing or data entry.
4. Operational Control
Operations whose costs are running out of control must be considered for outsourcing.
Departments that may have evolved over time into uncontrolled and poorly managed areas are
prime motivators for outsourcing. In addition, an outsourcing company can bring better
management skills to your company than what would otherwise be available.
 Example: An information technology department that has too many projects, not enough
people and a budget that far exceeds their contribution to the organization. A contracted
outsourcing agreement will force management to prioritize their requests and bring control
back to that area.
5. Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional
resources when you need them and release them when you're done.
Example: An accounting department that is short-handed during tax season and auditing
periods. Outsourcing these functions can provide the additional resources for a fixed period of
time at a consistent cost.
6. Continuity & Risk Management
Periods of high employee turnover will add uncertainty and inconsistency to the operations.
Outsourcing will provide a level of continuity to the company while reducing the risk that a
substandard level of operation would bring to the company.
Example: The human resource manager is on an extended medical leave and the two
administrative assistants leave for new jobs in a very short period of time. Outsourcing the
human resource function would reduce the risk and allow the company to keep operating.
7. Develop Internal Staff
A large project needs to be undertaken that requires skills that your staff does not possess. On-
site outsourcing of the project will bring people with the skills you need in your company. Your
people can work alongside them to acquire the new skill set.
Example: A company needs to embark on a replacement/upgrade project on a variety of custom
built equipment. Your engineers do not have the skills required to design new and upgraded
equipment.
Outsourcing this project and requiring the outsourced engineers to work on-site will allow your
engineers to acquire a new skill set.

B. Disadvantages of Outsourcing

1. You Lose Some Control

As you might expect, when you farm work out to external agencies or freelancers, youre losing
control of how those tasks are being monitored and performed. So long as you know and trust
who youve hired, that shouldnt be a huge issue but youve got to tread carefully.
2. There are Hidden Costs

Although outsourcing work is generally considered cheaper, yo must also beware of getting
ripped off. Outsourcing companies or big agencies will typically ask small business owners to
sign lengthy contractual agreements, and theyll include plenty of fine print. If you dont read
the terms carefully, you could get hit with unexpected costs.

3. There are Security Risks

In this age of data protection, its essential that you exercise caution whenever using customer
data. If you plan to outsource processes that require personal data, you could be placing the
privacy of others or security of your business at risk by passing that data on to other people.

4. You Reduce Quality Control

Outsourcing companies and some freelancers may often be motivated by profit rather than a
job well done. That means the work you send out may come back quickly, but will lack the
standard and quality that customers have come to expect from your products or services.

5. You Share Financial Burdens

Although it can be nice to bring in expert agencies to share in risks, it can be pretty dangerous
to tie your business to the financial well-being of another company. Again, youve got to spell
out any and all terms and conditions in contractual arrangements plainly because you dont
want to take a financial hit if they fail to deliver.

6. You Risk Public Backlash

If youre taking work overseas (even just to write a blog or two), your business very well may
run into ill will from consumers that have taken a moral stance against outsourcing. Right or
wrong, for better or for worse, some form of criticism is often inevitable.

7. You Shift Time Frames

One major disadvantage of outsourcing particular tasks is the risk that your freelancers or
partner agency may be marching to the beat of a different drum. As a result, it might be difficult
to synchronize schedules in order to ensure your customers receive whats promised to them on
a reliable timeline.

8. You Can Lose Your Focus

Because many outsourcing agencies or freelancers tend to service multiple clients at any given
time, the work youre sending out may not be receiving the focus it deserves. Depending on the
processes youre outsourcing, that lack of focus could be detrimental to your small business.

9. Things Get Lost in Translation

 It doesnt matter whether youre dealing with overseas freelancers or some talented expert just
up the street but if youre handing out remote work via email or telephone, important
instructions are often lost in translation. That could cause you serious time, money and hassle.

10. You May Face Moral Dilemmas

While it may not be an issue for everyone, a major disadvantage of outsourcing is that you
may be denying your team or a talented local agency crucial work or development
opportunities. Growth begets growth, and by outsourcing work, you may not be contributing
to the growth of your community.