Outsourcing has become a fundamental strategy, because it has allowed different companies to improve their performance indicators, in terms of competitiveness and productivity. Although it brings lots of benefits, it also has some disadvantages.

In this article, you will understand better what outsourcing stands for, its characteristics, and the advantages and disadvantages of outsourcing.

Many companies have been implementing this strategy to improve their effectiveness, being able to focus on their core business and the development of their product/service or to reduce costs considering that it is possible to outsource in different countries and it is possible to find very good talent to develop specific tasks by lower salaries.

What does outsourcing mean?

Firstly, you must understand the meaning of outsourcing to be clear about the process and purpose of this strategy.

Depending on different contexts the definition may vary. However, it can be generally understood as a management tool that allows the company to delegate some tasks to other companies or freelancers, that are important but do not makeup part of the core business of the company.

Here are other definitions that can be considered for different contexts.

Modality of contracting

Outsourcing occurs when certain activity ceases to be carried out by one company's workers occurs when a contractor executes works or provides services with his workers under his dependence, in favor of a hirer, natural or legal person, who sets the contractor's task and is transferred to another.

Legal perspective

Outsourcing occurs when a contractor executes works or provides services with his workers under his dependence, in favor of a hirer, natural or legal person, who sets the tasks of the contractor and supervises him in the development of services or execution of the contracted works.

Main characteristics of outsourcing

Outsourcing characterizes mainly because it is an excellent tool to help companies achieve their main goals while improving their operational efficiency, optimization of resources, and leverage of competitive advantages.

Another important characteristic

• Shared responsibility between the contractor and the company.
• Future growth for the contractor and the company.
• New alliances.
• Only complementary activities are outsourced.
• It is a service that is generally contracted for more than one year.
• The contractor must assume indirect risks.
• It must have measurable quality parameters.
• The conditions must be arranged from the first approach.

Advantages of outsourcing

Now we will present some advantages that can result from implementing outsourcing in your company.

• You will be able to avoid some tedious tasks related to the integration of a new employee into your company.
• As outsourcing can be done from any part of the world, you will be able to find more variety of candidates and talents, which will reduce the limitations to find the right candidate.
• You can significantly reduce payroll costs because labor in other countries can be much cheaper than in the US.
• Quick access to new technological tools, without having to invest in them and without the need to train personnel to handle them.
• It will be easier to adapt to changing environments in the event of a sudden change such as the pandemic.

Disadvantages of outsourcing

Just as it is worth highlighting the advantages, it is also important that you know the possible disadvantages that implementing an outsourcing strategy may entail.

• If the process is not handled well, it can result in the demotivation of the workforce and the loss of the sense of belonging to the company, with the usual loss of productivity.
• If the contractor's pre-contract evaluation was not done with due diligence, there is the possibility of non-compliance.
• You must be careful with all the clauses of confidentiality and handling of information to avoid lawsuits.
• You must be willing to give up some control of your company since you are going to delegate certain tasks to third parties.
• The efforts to maintain the corporate culture must be much greater since you must know how to transmit the values ​​of your company so that they are reflected at work.

Final thoughts

Implementing an outsourcing strategy is a great opportunity to improve the efficiency of the work team and to be able to achieve the company's objectives more assertively. However, you must have clarity on how to carry out the process, what adaptations you must make in the company, and know very well what you are getting involved in, to create an adequate strategy where the advantages stand out more than the disadvantages and where the positive effects outweigh possible negative effects.

At Outshore we can guide you through all the processes to help you find the best way to outsource in LATAM. Book now a discovery call!