If a company needs a certain service or does not find it profitable to set up an internal department or hire a person for certain activities, it can resort to outsourcing. It's a strategy that can be more or less beneficial depending on the company, and that's why in this article we examine the pros and cons of outsourcing.
Outsourcing is an English word that results from the combination of two English words: "out" in the meaning of "outside" and "source", which literally means to draw on outside suppliers of product or service.
This is where a company hires an outside party to provide services or produce specific goods that the company would normally perform or produce internally using its own resources, thereby delegating part of its work. This allows the company to focus on the most important processes in order to reduce costs that would be much higher if they were hired internally, or for external specialists to take over the work in a specialist area.
Depending on its strategy and needs, a company can outsource certain tasks or services, these are very common examples:
A company can resort to outsourcing as far as it is favorable for its conditions, its quality standards, its costs and its deadlines. Some advantages of outsourcing are:
Hiring internal staff comes with high costs, especially when it comes to individual tasks or tasks that are not absolutely necessary for the company. Outsourcing certain activities, where an external company can have more experience and efficiency, leads to lower own costs.
The outsourcing of professionals specialized in certain activities entails access to current technologies. Otherwise, it would cost your business more than the profit it brings. As a rule, most outsourcing agencies are proficient in latest trends, which they can introduce into your project.
Outsourcing can also be an alternative if the company cannot find qualified workers with the desired experience to hire internally in the market.
By outsourcing and delegating tasks to third parties that offer the same (or in most cases higher) level of quality, your company can focus human resources on core tasks, increase productivity and efficiency, and improve the end product.
Since your company concentrates on its main tasks and a specialized third party takes care of the rest, for example the implementation of your e-commerce project, or integration with an ERP or PIM system, production times can be reduced and products or complete services be delivered faster. Delivery is very important in online trading, please read more about this in our article here.
As a rule, new employees in organizations are trained in relation to the company culture and the work itself. By outsourcing their tasks, this time and thus costs are saved for the company.
Additionally, with outsourcing, the company does not have to worry about mandatory training times as these are the responsibility of the contracted company.
Learn more about the Advantages of software outsourcing in Ukraine.
Despite several associated benefits, resorting to outsourcing can pose some risks.
Outsourcing an activity implies trust in the agency, but it also implies that there is not much control over the tasks and their quality and delivery times. That's why you have to choose an outsourcing agency correctly. We wrote an article on this topic: “How to choose an ecommerce agency?”
Somewhat related to the previous point, especially when the work is done remotely – and even more so when it takes place in different countries – there are sometimes communication issues that are rare with an inside team as your own team is already used to internal processes. This can sometimes lead to longer deadlines. To avoid misunderstandings on the language level, look for an experienced agency with professional staff who can provide outsourcing consulting and other services at a high level.
In order to protect the commercial interests of each party and to try to enforce the agreements, it may be necessary to resort to contracts with fixed terms, which requires time and control.
Depending on the activities, data may be passed on to third parties. Even if only essential data is transmitted, there is always a risk that the third party will not comply with the standards for protecting the confidential data.
It is of very great importance to add the confidentiality agreements to the service contracts to ensure data security (prevention of theft, disclosure of information, etc.).
There is a possibility that the contractor will not deliver the product or service within the deadline or even give up completing it. One of the ways to reduce all these negative aspects of outsourcing and avoid risks is to use the so-called Dedicated Team-Models. For that, it is important to find a reliable agency that can provide a Dedicated Team and have all contracts in place.
KennerSoft is an experienced German agency with two development offices in Ukraine and Germany and sales offices in the USA and Taiwan. We specialize in web development and integration. We also create online shops, web services, B2B portals and marketplaces. We use the following technologies for individual software development: Shopware, OXID, Magento, EspoCRM, KennerPIM and others. We also offer the highest quality advice and further support for your project.
Please contact our team, we will be glad to help you.