Outsourcing is an excellent cost-cutting recruitment strategy that can seem all upside as you scale your business and fill skill gaps in the ranks.
However, as with anything in business, there are hidden costs and consequences to outsourcing that you need to keep in mind. In this guide, we’ll take a look at 6 of the most surprising and unexpected consequences of outsourcing your business, and the impact they can have.
In addition, discover how productivity monitoring tools like Insightful help keep tabs on work at home productivity of outsourced and in-house staff.
1. Losing Control
Whenever you outsource business services, whether they are core to your day-to-day operations or not, you relinquish a level of control over your business.
Leaning on outsourcing as a long-term strategy can have the impact of making your company feel like a series of fragmented teams working towards the same goals. Lose too much control, and you risk compromising your company culture and values, as you can rely too much on external help to solve internal problems.
Just as a company entirely comprising contractors would be risky, one that uses many outsourced teams can suffer from similar problems such as:
- A lack of understanding of company values
- Less appreciation for overall strategic goals and direction
- A series of different processes, workflows, and systems that can slow down productivity
To overcome the issue of losing control of your company when outsourcing, it’s important to evaluate each core business service and weigh up the pros and cons of delegating them outside the company.
It’s also worth clarifying your expectations upfront whenever you onboard an outsourced team to make sure they work with you rather than alongside you.
2. Increases Security Risks
For many companies, there’s a wealth of sensitive and confidential data to protect to safeguard the interests of customers and stakeholders.
When you outsource, you expose this data to more people, which will naturally raise concerns over security. Even if there’s no foul play or intentions of stealing data, sometimes simply sharing data with a third-party team can lead to breaches or leaks due to poor security measures on their end.
The last thing you want to do when outsourcing is put your important data in jeopardy since that could prove catastrophic. To help mitigate this risk, make sure to vet MSPs (managed service providers) before outsourcing core business services to check the security protocols they have in place.
You can also use hidden employee monitoring software to combat the threat of heightened security risks by monitoring individual activity closely. Determining productivity is one benefit, but you can also leverage mac monitoring software like Insightful to mitigate cybersecurity threats such as the risk of internal employee fraud.
3. Hidden Costs
Outsourcing is often viewed as one of the most cost-effective ways to solve personnel issues and skill shortages. The average salary in India in USD is $260 for a web developer, for example, so it’s easy to see how this could be a financially prudent move.
Yet there can be a number of hidden costs that can blindside you if you fail to plan accordingly.
Hidden costs associated with outsourcing include:
- Software subscriptions necessary to collaborate effectively
- The shifting scope of projects increasing your budget over time
- The inclusion of extra consultation services
To make sure you don’t get stung by these hidden costs, do due diligence before hiring an outsourced team by comparing rates with other options, and go into it with a clear budget in mind. You can then use track employee productivity software tools to track performance levels and hold outsourced teams accountable to your initial agreement.
The surveillance of employees at work can provide you with access to metrics to measure team performance which can in turn show you where you may be losing money.
4. Negative Impact on Reputation
It isn’t always the case that outsourcing leads to a lower level of quality regarding services provided. In fact, if you factor in all the right criteria, you make an effective hire and onboard a highly-specialized team that will help you redirect your energy and resources to other areas to encourage rapid growth.
Regardless, there is always a risk that outsourcing - especially services such as customer support - can negatively impact your company’s reputation.
When you have an outsourced team handling customer concerns on a regular basis, you operate on the assumption that they:
- Care as much as in-house employees about the product and customers
- Fully understand the product or service you offer
- Are willing to go the extra mile to assist customers
If you’re wrong in any of these assumptions, you could encounter a situation in which customers end up dissatisfied with their interactions with your outsourced customer support.
This in turn can damage brand loyalty and lead to some customers looking elsewhere for solutions to their problems.
To prevent this potential reputational hit, you have to make sure that services are performed to your standards and that customer-facing outsourced teams in particular understand your brand voice and the way you deal with customer concerns.
Stealth computer monitoring can help you maintain high standards across both in-house and outsourced teams alike. The employee monitoring software definition is any tool that allows you to view and manage activity remotely, so using these tools helps ensure you keep the bar high.
5. Weakens Bond with Workforce
It isn’t only customers that could feel a diminishing relationship with your company if you outsource services, but also your workforce.
If you consistently outsource core business services as part of your recruitment strategy, you run the risk of alienating your employees and causing them to fear for their own jobs. Seeing the delegation of many business services integral to the success of the business can naturally create fear within the ranks that everyone is replaceable.
This can of course damage your company culture and weaken the incentive for employees to want to remain loyal over time.
To keep employees on board long-term, it’s important to be transparent about your plans for the future and provide plenty of upskilling opportunities to highlight a clear internal pathway. If your employees feel like their job is leading to a dead-end position or their responsibilities will eventually be absorbed by an outsourced team, it threatens any sense of belonging and weakens your bond with your workforce.
6. Invites Strong Competition
One of the last unexpected consequences of outsourcing you should think about is how it invites strong competition.
The last thing you want to do in business is give your competitors a leg up and an easy way of differentiating themselves with stronger performance in a specific area. But when you consistently turn to outsourcing, you can do just that.
By outsourcing customer support, for example, you open the doors for your competition to steal market share by offering highly personalized in-house customer support. If you outsource your marketing services, you could give up territory to a competitor with a fully-trained internal marketing team that’s synced up well with their strategic objectives.
A haphazard approach to outsourcing in other words can bring on strong competition and weaken your position in the market.
To avoid this consequence, find out which business services have the potential to deliver the highest ROI through outsourcing. If you can significantly reduce costs by outsourcing IT support which enables you to double down on your sales and marketing, this could be a great way to ensure you don’t relinquish any authority in the market.