Pitfalls Of Back Office Outsourcing To Watch Out
When a company considers the option of cutting down on its operational costs, the first thing that comes to mind is using the services of back office outsourcing especially to overseas consultants or employees. Typically only those functions of the company were outsourced that fell under the category of the non-core activities or that needed specialized skills not present in the open market. However in the wake of the recent economic meltdown, foreign companies might consider outsourcing almost any area but the decision to actually outsource a particular activity should be made after careful consideration of every option. The Possible pitfalls of back office outsourcing that need to be watched out before signing the contract between the client and the vendor company are mentioned in detail.
Back Office Outsourcing Results in Absence of Managerial Control
When the foreign company signs a contract to offshore a single task or transfer the functions of an entire department, the control and management of that function is transferred over to the vendor company. This puts the client company in a tough situation as it finds it harder to manage the back office outsourcing company in comparison to its own employees.
Security and Confidentiality Threat due to Back Office Outsourcing
Information is the life blood of any business to keep it running. When the client company is transferring services like medical records, payroll and other confidential information to the back office outsourcing company, there is a higher risk that this confidentiality might be compromised. In case where the outsource activity involves sharing product formulas, drawings or propriety company data, a proper evaluation should be done that ensures that the data is protected. A penalty clause should also be included in the agreement in the event of a mishap.
Back Office Outsourcing Involves Hidden Costs
A contract should be signed only after all the details of the services that will be offered by the back office outsourcing company are covered. It has to be remembered that this is the business of the vendor company, hence even a minute clause that is not present in the agreement will form the basis for paying additional charges by the client company. You will also have to bear the legal fees for hiring a lawyer in order to review the terms of the contract because the vendor company is often more focussed on deriving its share of profits out of this relationship.
Back Office Outsourcing and the Resulting Financial Tie Up
Because back office outsourcing results in transferring a part of the operations of the client company to a different location, it results in a financial interdependence. In case where the outsourcing company might go bankrupt, the foreign company is left holding the bag.
Quality Issues When it Comes to Back Office Outsourcing Services
Since the back office outsourcing company is primarily motivated by the price that is fixed in the terms of the contract, it means that profits might be maximized by decreasing expenses. There are also linguistic barriers that are experienced especially when the calls directed to the client company are received in an offshore location. A low quality call handling can result from word usage difficulty, improper accent and use of phrases that might be in-understandable to the native speaker. Most of the times, it is the monotonous nature of the outsourcing job that results in lowering the quality of the work.
Social Responsibility is Attached with Back Office Outsourcing
When a particular function or a whole departmental activity is outsourced to a different location, it amounts to an equivalent reduction of employment avenues in the country of the client company. If many people in your country have lost their jobs because of back office outsourcing, then resorting to the same goes against the social behaviour of the company outsourcing the process.
Before a business decides to outsource some of its activities to a different country, it is necessary that the interests of the employees and the customers are taken into consideration. This helps in making an informed decision.