The Pitfalls of Outsourcing

The playing field has definitely changed for participants in the corporate playing field. Nowadays, there are a lot of ways to cut costs done by companies. These have made the world even more globalized in the sense that companies can have certain duties performed by companies in other countries, and being more cost-effective. One of the common trends amongst companies is to outsource work.

What is outsourcing?

Outsourcing is when a company subcontracts a service to another company. This is usually done in the interest of lowering costs. What they would do is have the supplier perform a particular service and the buyer’s concerns are the end results (as contrasted to contracting out where the company is also concerned how it’s done). This enables the company to split service and manufacturing duties so that it becomes cost-efficient.

What are the disadvantages of outsourcing?

There are always disadvantages to every good idea out there. There are companies that tend to overlook the disadvantages and outsourcing then becomes unsuccessful. These can be avoided if the company works based upon the fundamental principles of outsourcing. These should be applied from the beginning of the relationship of the buyer and the supplier. One of them is for the buyer to determine what the services encompass and the metrics. This way, the buyer is ensured that it gets what it is paying for.

This should be done even before the contract is signed. The buyer should also be in control what the services and the performance would be. If the buyer lets the supplier dictate this, then problems are sure to arise. The buyer should also be able to describe what the scope of the services will be.

This includes every single component of the service. The problem if this is not clearly defined is that the supplier might provide something that wasn’t agreed upon and would charge premium for it. In a nutshell, the buyer should be able to communicate what it needs specifically, and should be in control all the time.

This would avoid any miscommunications and therefore bad relationships with the supplier. If the supplier is from a non-English speaking country, hiring an interpreter would save you millions (even billions) in the process.

Outsourcing really is a great way to save a lot of money. As long as the fundamental principles of outsourcing are followed, then the company should have no problem with it. It really is a matter of communicating to the supplier exactly what you want. GP

Posted in BPO Problems  on December 10, 2008 - 3:39 pm by admin  |