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Risks of Outsourcing

The Risks of Outsourcing

In recent decades, outsourcing has been touted as a new best practice for the many benefits it brings. Among the many advantages are enabling a company to focus on their core competencies by transferring less significant processes to a third-party service provider, obtaining access to expertise outside of the company, and significant operational savings.

However, nothing makes a company founder more afraid than to put his “baby” into the hands of strangers because few people ever talk about the disadvantages of outsourcing. It is only fair to present them here to ensure a prospective client jumps in with yes wide open. Read on to know more about the disadvantages of outsourcing and how to navigate them:

Moderate Commitment

As the founder, you have an incredible motivation and energy, which naturally also spills over to your own employees. This pushes an employee to work passionately overtime to complete the work faster or even devote nonwork hours to thinking about good solution for a work problem. Among outsourced service providers, this dedication might never be present. Especially among part-time workers and low-paid activities. For this reason, it is advisable to request feedback on the progress of the work every day, and generally, not to expect any superhuman performance.

Delays

Because of a variety of reasons and the different circumstances, a project could take twice as long as initially agreed. The reason for delays include miscommunication, inaccuracies in execution, employee issues, even major forces such as natural disasters, among others. Delays are actually difficult to avoid in projects and should be taken into account from the start. Expectations and buffers should be set from the beginning.

Intellectual Property, Data Privacy

In many countries, there are strict laws for the protection of intellectual property and data privacy. Even if this is self-evident, these laws are not always respected by foreign companies. The resulting damages could be expensive, especially if they result in legal disputes. To avoid this, ensure that your outsourcing service provider is aware of IP and data privacy laws and best practices.

No Learning, No Know-How

In the initial phase of a startup, you often have little knowledge of how business processes works. If you assign a task to a service provider immediately, you will miss gaining direct insight into these processes. A good example here is managing service requests from customers, tasks that are often given to a call center agents. The findings as problems and concerns are resolved can be worth gold for a young company. By dealing with issues in your own company, you can develop a long-term competitive edge.

Knowledge Transfer

Knowledge is important to guard in today’s business environment. When you outsource, ensure that only the relevant persons have access to data and that the knowledge of processes will be returned to your company, as agreed upon by both parties. It should be made clear which existing know-how has value for the company, how many employees can have access to this know-how, how it can be expanded through training, and how it can be protected. the contract must stipulate the rights and obligations of both the outsourcing company and client .

Custom-fit Outsourcing Solutions

Outsourcing does carry with it certain risks. On further consideration, the disadvantages still far outweigh the benefits. Before signing a contract with an outsourcing provider, make sure to do your research and ask your important questions.

If you are a company looking to augment your lean team by outsourcing some functions, let Yempo help you with our pool of dedicated, skilled employees. To learn more, contact us today!

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