Is outsourcing the best strategy?

At K Magill & Company we can provide businesses with help and advice. The following outlines the pros and cons of outsourcing core functions.

Outsourcing non-core operations has become very popular in recent years. Businesses now routinely outsource processes from cleaning to customer enquiries.

Other common areas for outsourcing include: payroll functions; human resources (insurance, recruitment etc); marketing; information and IT systems; and delivery.

The advantages

There are obvious potential benefits:

• Management is free to concentrate on the core business
• The use of resources, including human resources, is streamlined and more focused
• Cost savings are achieved through economies of scale
• Both risks and rewards are shared
• Quality of service benefits from specialisation
• Budgeting costs becomes more reliable in these areas because they are tied into contractual agreements.

Possible pitfalls

But there are also disadvantages to outsourcing:

• Your customers do not draw a distinction between the core services that you provide and the outsourced services supplied by others, so any shortcomings on the part of the contractors reflect on you.

• Some companies have also experienced dissent and demotivation within their own ranks as a result of outsourcing functions such as IT to contractors who do not share the same corporate culture and so do not treat employees in the way they expect to be treated.

A question of balance

As with most things outsourcing is a question of balance. For most businesses there will always be operations they can safely put in the hands of others and achieve both improved efficiency and cost savings.

But equally there will also be operations over which they will want to retain control. The art of good management is to know which is which! We can help you make the right decisions.

If you would like professional assistance from experienced accountants and business advisers, contact K Magill & Company.

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