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What is outsourcing?

Outsourcing, as the name suggests, means giving work out. A part of the activities or a whole service can be transferred to a person or to another company. Services are most often concerned, but in principle any activity can be outsourced. Take the automotive industry for example. A car is made up of a lot of spare parts, which are delivered and sold by different manufacturers. The company has thus outsourced production and can concentrate on the assembly of the parts and on the subsequent distribution of the car.

Is Outsourcing Appropriate For SMEs?

Outsourcing is obviously not just for the automotive industry, but is used by companies from various sectors. On the contrary, more and more young entrepreneurs are reaping the benefits of outsourcing. The reasons are many and varied.

Risks and personnel costs

Some activities are not fast enough to be implemented in own business. The lack of experience, time and interest in acquiring certain necessary knowledge are decisive in this case. Marketing is a classic example. Companies know full well that from now on, you have to show yourself on social networks. Not to mention, search engine optimization, a good website with a blog if possible, are also needed. But how exactly does it work? And more important: who will take care of it? Hiring someone for this is not really worth it, because new hires need to be trained first. You need a workstation with the right infrastructure, plus the administrative costs, such as pay slips and social security contributions. For this, it is often easier, faster and most of the time cheaper to mandate an agency or a freelance. As specialized professionals, they are constantly on the lookout for the most recent trends and achievements in their field of activity. They are not only more efficient, but also deliver high quality work. The risk of default has not yet been taken into account in this calculation. Indeed, an employee can fall ill or pregnant. These risks are almost non-existent if you use an agency. As long as the business does not disappear overnight, the outsourced service will be provided. If not, you won’t have to pay.

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Focus on your own strengths

We often tend to forget that each individual and each company has their own core competencies. For some its sales, for others it’s marketing, still others are tech-savvy. IT Outsourcing Companies in Dubai takes on its full meaning at this level. If you want to do everything yourself, you obviously need a lot of time for that. Entrepreneurs, however, should focus on what they can do best. Sectors that do not match their strengths should be outsourced. Even if this results in additional costs, it will result in a better result. Indeed, we are better in the activities that we do regularly. If you have to concentrate on a lot of things at the same time, it is almost impossible to be able to optimize a particular task.

Scaling

Some industries are more affected than others, but basically it’s the concern of every successful business. The demand can sometimes be so great that we no longer know how to accomplish all the tasks ahead. Or on the contrary, there may be phases that turn out to be extremely calm. All this can be avoided by outsourcing. In the event of a larger number of orders, certain activities can be outsourced. If the company is short on time, various tasks can also be outsourced to other companies. As soon as the situation is a little calmer, there is no need to mandate external people. This is really a great concept, as there are no unnecessary labor costs for the company. Scaling is a factor to consider when growing a business. Indeed, we remain flexible as to the scope of the orders to be processed, and these are good preconditions for a company to achieve significant savings in the long term.

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What are the disadvantages of outsourcing for SMEs?

Note first that the modern market economy operates on the concept of outsourcing. The companies specialize in one or more offers. With increased efficiency and quality, they are more competitive in the market. Tasks which do not influence the improvement of offers are bought from other companies. Thus each company outsources, even if the purchase of pre-manufactured products or services is not necessarily considered as such. As long as the supplier can be replaced easily and quickly by another, this only brings advantages. As services become more complex and specialized, this can entail risks. This should be taken into account when deciding whether or not to outsource, and, to the extent possible,

Addiction

One big drawback is addiction. Even if a task is performed quickly and inexpensively, one logically becomes dependent on the service provider. If the latter is in difficulty, this has direct consequences on your business. As long as there are no long-term contracts for this collaboration, the supplier can adapt its prices and conditions. Even if contracts exist, they are only valid for a short period. The greater the effort required changing supplier and the fewer alternatives there are, the worse your negotiating position will be. When negotiating a new contract, the supplier can easily assert his conditions. If you have to part with an external provider, you will quickly be faced with new difficulties. When an individual activity has been outsourced over a very long period of time, specialist knowledge in this sub-domain decreases within the company itself. If there are no other alternatives, skills and knowledge must again be acquired. This can cause delays in all business activities.

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Control

Apart from a few special cases, the suppliers have several customers. As a result, there may be some overlap regarding customer needs. It is the provider’s responsibility to resolve these issues. He must prioritize requests and decide on the distribution of resources himself. As a customer, you have little influence on this decision, and how the supplier will handle your urgent needs compared to their other customers. If these services are regulated within your company, you can decide the prioritization yourself. Thus, a project can be put in the background, in favor of a more urgent task.

Conclusion

Outsourcing is not just for large international companies. Indeed, the outsourcing of certain activities can be extremely advantageous for SMEs:

You can focus entirely on your skills;

The services can be adapted according to the needs;

Fixed costs can be kept low;

Reduction of the risk of default of those who are the only ones to know a field of activity.

In summary, the outsourcing (outsourcing) of certain subdomains is a good thing. The advantages are manifold. But, there are still some drawbacks. They need to be reviewed and taken into consideration on a regular basis. Dependence on a single supplier may increase over time. If you collaborate closely with someone, you often realize this when it is already too late. A second external web development service provider should always be available in order to minimize the potential risk of failure. If addiction cannot be avoided, you should contractually protect yourself against the risks.

 

 

Shabbir Ahmad

Shabbir Ahmad is a freelance enthusiastic blogger & SEO expert. He is the founder of Shifted Magazine & Shifted News. He contributes to many authority blogs including porch, hackernoon & techcrunch.

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