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The Cost of Outsourcing

February 26, 2016

There are more people venturing into business and entrepreneurship today, which explains the small and medium enterprise sector is thriving. It is impossible for every business owner to possess the skill to manage each task. For that reason, most will choose to outsource some aspects of their operations, but what is the cost of outsourcing?  We’ll cover the benefits and trade-offs a small business owner should consider.

Outsourcing is delegating repetitive, time consuming work and highly skilled tasks. It enables a business owner to free up valuable time and focus on the core reason the business is in existence. However, outsourcing is not free- there is some cost that it has for the business owner. Is it worth it? Here is a comparison of the benefits and the trade-offs.

Outsourcing Benefits

Outsourcing continues to gain popularity due to its host of benefits which include the following:

  1. When you outsource, you get access to highly skilled workers who have the right expertise and resources to get the job done. You are paying for both the work they’re are doing and the knowledge that comes from their extensive experience. For example, should you need some artwork done, a good graphic designer will create something that is distinctly polished and on trend. You also save money attempting to train a person or in purchasing hardware and software to do the artwork in-house.
  2. Outsourcing enables a business owner to free up valuable time and energy. Consider a scenario where it is necessary to data enter all business cards so you can better manage the relationships, whether through email marketing, mailing calling or social media. Rather than taking the time to do this yourself, you can outsource the task to a virtual assistant or agency who is able to complete it faster, with high efficiency.
  3. Small businesses simply do not have the resources to hire entire departments like those that larger firms have, yet are expected to compete with them. Outsourcing helps the smaller companies to offer the services that the client expects without actually having to invest in them in-house.

Outsourcing Trade-Offs

If outsourcing is so great, why isn’t everyone doing it? Just as there are benefits, it is necessary to weigh them against the trade-offs to finally determine if outsourcing is worth it. The trade-offs include:

  1. The cost of managing and communicating with the outsourcer can be more time consuming which can in affect outweigh the expected savings on time and resources.
  2. Another tradeoff reveals that the more work is outsourced, the less knowledge, experience and skills are developed in the company. This limits the control a business owner can have in the company.
  3. Outsourcing may lead to a company becoming over dependent on the service provider, which may lead to eventual loss of vital information, intellectual property and intellectual property rights.

A quick comparison of the benefits and trade-offs reveals that there is much to be gained by outsourcing, and that the trade-offs can easily be controlled with careful planning. The cost of outsourcing is much more valuable than detrimental for a company.

What was service would you never outsource?


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