Disadvantages Of Outsourcing

This article is a follow up to my blog article Outsource Advertising Sales, where I outlined the benefits of outsourcing your advertising and sales. In that article I promised I would outline the disadvantages in a subsequent article so here I go. The disadvantages of outsourcing for most small business are limited but they do exist. Below are the top 5 that I can think of.


1. Outsourcing Supplier No Longer Able To Supply Your Business

This can happen for a number of reasons including the supplier decides they no longer want to supply to you or they go out of business, The good news is that this problem can usually easily be rectified by finding a new supplier to provide your outsourced service to you.


2. Confidentiality Risk

Anytime you involve someone new in your business, whether that be a new employee, a new business partner or a new supplier you increase your confidentiality risk. Outsourcing is no different. As with any business interaction you need to do you due diligence to mitigate this risk as much as possible if you decide to outsource.


3. Loss Of Control Of That Function

By giving away a function of your business to an outsource you gain the advantage of having an expert do it for you allowing you to focus on what you do best. This does come at the cost of losing some control of that function as you will need to leave some freedom of control with the supplier to do things the way they see fit. If you don't the supplier will not be very efficient and you won't get good results from them. If you do decide to outsource you need to work with your supplier to find the right balance.


4. Lack Of Internal Talent Development For Outsourced Task

If you outsource a function you will not be developing those skills in any of your employees. This is kind of the idea though. The only case where this becomes a problem is if your long term plan is to at some point print the function back in house. To eliminate this concern you will just need to plan on hiring externally or know internal hires will need further external training when you bring the function back in house.


5. May Be More Costly

If you are playing someone to do something for you, you are probably going to be paying more then what it would cost you to do it on your own. This is for the simple fact that your supplier needs to make money therefore they need to mark up the service above there cost. This may not always be the case though as sometimes because a supplier specializes and is an expert at something they are able to provide the service at a lower cost then you could on your own. This is because they are more experienced and therefore more efficient. In the case that they are more expensive it still may be worth your while to outsource for three reasons. One, the value of the productivity gains you experience in the other functions may more then off set the extra costs of outsourcing. Two, the results may be better then you could achieve on your own, therefore making the extra spend worth while. Three, there may be additional risks/flexibility benefits of outsourcing such as the ability to quickly scale down or up without any additional or lost fixed costs.


Interested in reading more about this topic? Read this article as well. The pros and cons of outsourcing. It is written from the view point of off shore outsourcing but sample principles apply. I like the article because I think the the list of pros and cons does a fairly good job of covering all the main things to consider.

If you are considering out sourcing the marketing and/or sales of your business I hope this article on the disadvantages of outsourcing has been beneficial. As with any decision there are pros and cons to each option. Outsourcing is no different. Interested in following me on Twitter? Add me today.

Thanks for reading this article on disadvantages of outsourcing. I hope it was thought provoking.