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Good outsourcing requires solid fiscal knowledge of a variety of locales.

Word on the street says that outsourcing is the most profitable and practical way to cut costs and efficiently handle small and large workloads with minimal risk. Before taking the plunge for yourself or your business, it is important to be aware of common pitfalls and misconceptions.

For the purpose of ensuring that the content of this post is clear, and due to the fact that the word “outsourcing” has many senses and is frequently used incorrectly, I have formulated a concise definition of the word: “Outsourcing” is defined as the practice of contracting outside agents to perform activities that are normally completed in-house.

Whether it’s answering your personal emails or making travel reservations, virtually any service imaginable can be outsourced.

As great and profitable as this “remote” solution sounds from the get-go, there are many pros and cons you need to be aware of. Here are some of the most common ones:

Pros:

  • Lower labor costs – Depending on where your service provider is geographically located, you can easily save 50% off normal expenses due to exchange rate differences.
  • Scalability – Outsourced companies will normally be prepared to handle spikes and dips in production volume.
  • Access to specialized equipment – Sometimes the cost of purchasing a specialized piece of equipment can not be justified due to low demand or a high risk factor. Utilizing an outside company for such matters can prove more cost efficient and practical in the long run.

Cons:

  • Quality control – The quality of work turned out can tend to degrade if not monitored closely.
  • Language barriers – If the company you are contracting is located in a country that doesn’t speak English as it’s primary language, you may run into duplication problems. If this is the case you will find yourself spending a significantly larger amount of time explaining yourself.
  • Security – Sensitive information can be harder to secure in the hands of an outside agent; therefore, making your business liable for any breaches that could occur.

Controversy:

As the number of US based companies outsourcing to third world countries grows, so does the number of unemployed American citizens who once found themselves with a job. Within the last decade this countries manufacturing employment rate has decreased by over 30% (5.5 million positions have been lost), this coincides with China’s entry into the World Trade Organization in 2001.

Conclusion:

Companies of all sizes have reaped the rewards of intelligent and effective outsourcing; contrarily, companies that didn’t do their homework encountered dire circumstances. The difference between success and failure lies in scrutinous research and trial and error.

While outsourcing every little aspect of your business may be tempting, try to keep your core-services in house; these are the things that separate you from your competition and make you unique.

Jack M. Napier

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