“Why would I outsource when I can just hire my own people?”

Outsourcing of Finance and HR ProcessesThis is the most frequently asked question when we compare hiring with outsourcing. You may be wondering why I am writing this since I am part of an outsourcing company. I should be just saying good stuff about us, right?

Well, the answer is pretty simple – I want you to know that there are disadvantages to outsourcing as well. And better to hear it from someone who is part of an outsourcing company than someone who claims to be an expert in this area.

What Are the 3 Disadvantages of Outsourcing?

 

1. Inflexible/ Rigid in the Services

Outsourcing companies are seen as inflexible and rigid in their delivery of services. The reason for this is that they are working within a strict set of standard operating procedures (SOPs). This allows them to maintain their low costs while providing the level of quality as stated in their contracts or service level agreements (SLAs).

For a little bit of background,  they often have different options (some call them tiers, levels, packages, etc.) each having a corresponding rate. The client chooses one, and gets the inclusions to that option. Once you cross a certain threshold, the provider makes a choice between saying a yes or a no to that request.

When they say yes for the extra “consideration” that the client is requesting, it is not performed in a level with much enthusiasm because it is not being paid for. Sorry, but at the end of the day, a business is still a business. And if they say no, well, the client gets frustrated that their simple request is being charged extra.

For example, you want to add an additional column in a report; or ask them to do an extra computation for this certain metric. Yes, they might do it. But that means they put in extra time and effort – those are added costs for your provider. And if they give you a quotation for the extra man-hours to do it, you keep telling yourself that this is very simple, why can’t they just do it for free or something to that effect. Frustrating isn’t it?

See, outsourcing is growing primarily because work is standardized. Reports are tweaked at the beginning of the service so that during the course of the engagement, only data entry is being done by the provider. All reports and output are formatted and systems-generated. They do not have to do anything extraordinary.

2. More Expensive

Yes, outsourcing companies costs higher if you simply compare it with a single person’s salary. You hire the company, its expertise, and its systems. This includes salaries, wages, benefits, mandatory government contributions, utilities, rent, computers, legitimate programs, trainings, taxes, supervision, skills and a whole lot more.

Outsourcing companies are usually monitored closely by the government that is why having transactions below-the-table are a big no-no (and that does not mean dealing with fixers or bribery to expedite something) From the simplest software licenses like Microsoft Office to copyrighted and patented systems like SAP or QuickBooks – all these are covered in the rates of outsourcing companies. And this makes outsourcing companies’ rates cost higher than one person’s salary.

3. Too Many Procedures

Ever wondered why there are a lot of forms used throughout the organization? Both online and offline, forms are used to make sense of data. It helps reduce errors and save time for its users – in this case, the client and the provider.

That is what outsourcing companies do. They have developed forms to facilitate the service they are performing. Because they are not exactly familiar or in the details of what their clients are doing, they have to understand what they are doing. By having the right information (brought about by having the correct data in the correct fields), it enables the client and the provider to speak the same language. The end result – the output for the service is not just good but great!

These are the top 3 disadvantages of outsourcing. Do you think we missed out on any? Let us know in the comments below.

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