Analyzing Global Outsourcing Pros and Cons 04 Apr 2014

Analyzing Global Outsourcing Pros and Cons

It is not uncommon to find companies outsourcing even major parts of their work to other global companies for the sake of cutting down the total cost. This is the main essence of global outsourcing. Global outsourcing refers to the method of assigning work to external vendors within the same country or offshore companies.

Before you outsource the work, you should be familiar with global outsourcing pros and cons as it will help you analyze how effective it is to outsource the work to another country.

The Merits of Global Outsourcing

We will opt for a balanced discussion of global outsourcing pros and cons and so we will first check out the benefits that it has to offer.

Reduction of Labor Cost

From a business point of view, the total expenses that will be incurred hold the highest value. You have to make sure to do all you can to keep the bills in check. There are countries where labor cost is really cheap and by opting to outsource your work to such nations, you can end up saving a great deal of money. The cost saving will be really high, if you are working on a big scale as it will entail larger saving of massive expenses.

Sharing Of Risk

No doubt, when you run a business, you have to deal with a great deal of risk. While there is insurance for coverage, having all your stuffs stacked at one single place makes to hard to recover from risks. On the other hand, if you choose to opt for global outsourcing, you will be able to distribute your risk evenly as a part of your team will always be located in another location.

Core Competencies

Almost all businesses have their core competencies and specific niche. However, to stay on the top of the ranks, you need to have an overall specialization. This is why global outsourcing can turn out to be effective. You can outsource other sectors to different countries and concentrate on your own niche. As you choose specialists for each area, your brand power and performance is sure to peak.

Speed Matters

When you have different teams working on a project simultaneously at various locations, the speed with which the work is executed witnesses a major improvement. If your global outsourced team falls in a different time zone, your company will effectively be working round the clock and this means that streamlining the job and getting it completed earlier is a definite possibility.

The Possible Problems That You May Face

While it is not uncommon to find people outsourcing their needs, you will have to handle your share of problems as well. If you choose to outsource your job for the first time, keep an eye on these points because knowing about the problems will help you be prepared.

Confidentiality Issues

You have to check that the information that you will share with the team to which you have outsourced work, they should keep the matters confidential. They should not leak it and create legal complications for you.

Communication Gap

One of the most common troubles when you have outsourced work is the communication problem. If you fail to explain the instructions properly or even if your instructions are lost in transit, it can deter the kind of performance your company will put.

Time Zone Issues

While most professional companies are likely to work this out, still if you choose to outsource your work to offshore companies that fall in a different time zone, you may face a few problems, especially if you have urgent work during hours that may fall under the non office timing at your outsourced team.

Hidden Costs

The primary aim for outsourcing is cost cutting however; there have been various occasions where people have seen that the total cost spiraling high for the simple reason that apart from the labor cost, there are additional costs incurred in all of these stages

  • Communication bills
  • Delivery charges
  • Charges in freight
  • Maintenance cost
  • Additional Cost due to delay
  • Managerial overhead

There can be a bundle of other costs too and when you make a sum total of all of it, you might end up finding your overall bill to be much higher than what you have traded for.

If you are careful enough to sort through the above listed problems and explain your requirements clearly and have a contract listing the major points, you will be able to make the most out of global outsourcing.

No doubt, after analyzing the global outsourcing pros and cons, you can conclude that it helps in improving the economical condition of other nations and it offers one of the best ways of spreading your work in distinct geographical boundaries which can obviously push your business returns.

– Backoffice Pro

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