Outsourcing myths debunked

Outsourcing has evolved into a strategic tool for businesses worldwide, offering numerous advantages such as cost savings, access to specialised skills and flexibility in operations. Despite its widespread adoption, outsourcing is often plagued by misconceptions that may deter organisations from fully leveraging its potential benefits.

Derek Gallimore, CEO of Outsource Accelerator, a leading marketplace and advisory for outsourcing, wrote in a Forbes article that large firms have been using offshore staffing for more than three decades, and in 2020, the outsourcing industry was valued at over $200 billion. This figure reflects how contemporary outsourcing can provide a number of business advantages, such as decreased labour expenses and a wider pool for ideas. Additionally, it now resembles regular local employment more than anything else; the only difference is that workers are seated in a different country.

To appreciate outsourcing’s advantages, it’s important to dispel a few of the most widespread myths:

Myth 1: Outsourcing is only suitable for large corporations

There exists a prevailing belief that outsourcing is exclusively reserved for large corporations with extensive resources. Small and medium-sized enterprises (SMEs) often perceive outsourcing as financially unfeasible or beyond their operational scope. However, empirical evidence suggests that outsourcing can be equally beneficial for SMEs, enabling them to access specialised expertise, scale operations and remain agile in dynamic market environments.

For example, Alibaba.com outsourced the software development throughout their early stages of business development. According to software company Avenga, Jack Ma, the co-founder of Alibaba Group, and his team used outside expertise for technical implementation since they understood how important it was to concentrate on their core competencies and operations. Making this choice was essential to Alibaba’s development into one of the biggest e-commerce businesses in the world.

Outsourcing providers increasingly cater to the needs of SMEs, offering flexible solutions tailored to their requirements.

Myth 2: Outsourcing leads to job losses

One of the most enduring myths about outsourcing is its perceived association with job losses in the domestic market. Critics argue that outsourcing displaces local workers and exacerbates unemployment rates. However, empirical studies suggest a more nuanced reality.

These days, the industry offers extremely specialised staffing solutions for a range of positions, industries and professions.  By outsourcing non-core functions, businesses can redirect resources towards core activities, fostering growth and creating new employment opportunities. Moreover, outsourcing can stimulate economic development by enabling businesses to remain competitive in the global marketplace.

A great example of this is the outsourcing success story of P&G (Procter & Gamble Company) who leveraged outsourcing to improve product innovation. The Bettersource article mentions that the business discovered that exploring outside of P&G’s walls could result in extremely valuable inventions that were missed when following the traditional internal, do-it-ourselves paradigm. The business also outsourced essential but non-core business processes and focused on their management and operations, improving their customer service levels and workload pressure had been relieved from their existing team.

Myth 3: Outsourcing compromises quality

Another common misconception is that outsourcing compromises the quality of products or services delivered. This can be argued that distant outsourcing partners may lack accountability and fail to meet quality standards. Contrary to this belief, outsourcing, when managed effectively, can uphold or even enhance quality levels. According to the Forbes article by Derek Gallimore, the quality and sophistication of the industry has come a long way.

Establishing robust communication channels, implementing quality assurance mechanisms and conducting thorough due diligence when selecting outsourcing partners are critical steps in ensuring quality outcomes.

Gallimore writes, ‘You can get fantastic staff, but even the best people require a supportive training framework, clear processes and explicit objectives. Since this will be a "remote" role, it's important to be as clear as possible with your requirements and spend more time training at the beginning. Delegate. Don't abdicate.’

This article underscores the importance of dispelling misconceptions surrounding outsourcing to facilitate informed decision-making among businesses. By examining and debunking the three common myths associated with outsourcing, organisations can better understand its potential benefits and challenges. Embracing outsourcing as a strategic imperative, contingent upon careful planning and execution, can empower businesses to optimise resources, drive innovation and achieve sustainable growth in an increasingly competitive global landscape.