What is Outsourcing? | Meaning & Definition | Akrivia HCM

Outsourcing helps companies to reduce costs which could let them build their business. It also helps make business more competitive, thereby creating more opportunities and creating better results for the clients. Outsourcing is not only done by small companies; large enterprises are increasingly outsourcing work from overseas countries. Most of the time, these companies make outsourcing relationships with those who have an aggressive cost structure and can be competitive

What are the advantages of outsourcing?

Outsourcing has come a long way from a cost-cutting measure involving strategic decision-making. With the advancements in information technology, outsourcing has become much more accessible and cost-effective. It is an excellent way of reducing costs and performing tasks efficiently. It is suitable for businesses to have an outside perspective with best practices, and it also gives a lot of stretch in terms of staffing as it can skip the whole hiring process.

A lot of time is saved, thereby increasing efficiency as lots of projects can be undertaken simultaneously. Outsourcing can help save expenditure on technology and other infrastructure. Many companies outsource their human resources functions to countries like India and China, where many young employees are highly qualified and have good English skills.

What's the difference between offshoring and outsourcing?

Offshoring involves business processes that are moved to another country to reduce costs and improve profits.

Outsourcing occurs when a business hires an outside company or individual to complete specific business requirements.

What can be outsourced and what can't?

Tasks that can be outsourced:

1) Marketing
2) Sales
3) Accounting
4) Customer service
5) Technology tasks
6) HR – hiring and training employees

Tasks that should not be outsourced:

1) Employee development and upskilling (the benefits of this function should not be underestimated, especially in times of economic downturns when skill-shortage becomes a significant problem for firms).
2) Business strategies (an external source may not understand your firm’s goals and interests completely).
3) Quality Assurance (internal resources should always carry this out).

Is outsourcing a good or bad thing?

Suppose the outsourced work is something that another company can do at a lower cost than your own company. In that case, it is good for the company and the company’s employees as well. It saves money for the company, which otherwise would have been spent on paying its employees’ salaries.

When is the best time to outsource?

A perfect time to outsource is when a company is looking at bit costs yet keeping the same output, when an organization wants more attention to business growth and strategy, or when having enough technology assumptions is difficult. Outsourcing is an easy way to speed-up development.

Can outsourcing be considered ethical?

For most companies outsourcing is an ethical practice as it helps them reduce cost, increase efficiency and improve the quality of their products. They outsource their business functions to overseas firms or local Indian firms. It ensures that they keep transparency in their spending and avoid any corruption.

A few companies expect more from outsourcing than it can offer them. These companies then face problems such as increased cost, decreased efficiency, etc. These companies also face ethical issues like loss of jobs, increase in corruption, etc.

What are the disadvantages of outsourcing?

While outsourcing or contract-based work seems like a relatively easy way to make money, there are significant disadvantages. The first disadvantage is security issues.

Another security risk is that sometimes the outsourced company can be hacked by outside sources, so your confidential information might end up in the wrong hands.

Another disadvantage of outsourcing or contract-based work is that it may not meet company standards.

Another disadvantage is loss of control. For example, sometimes outsourced employees may have their way of doing things, and hence when you outsource a project, you give up some control over how it will carry out the project. It can cause problems later in integrating the project with the rest of your business processes.

Another disadvantage is hidden costs. Due to other expenses getting lumped into your cost savings from outsourcing, it can be difficult for you to determine your total cost accurately.

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