Outsourcing: definition, advantages and disadvantages

Outsourcing: definition, advantages and disadvantages

Outsourcing, for “outsourcing” in French, initially designates the transfer of a company function to an external partner. To focus on its core business and reduce costs, the company outsources specific tasks to a specialized service provider. Historically, the call center is the first outsourced function: outsourcing was then mostly delocalized. In the 1980s, the practice applied to the IT function: a company that did not have the skills in-house entrusted the management of its IS to an ESN under an outsourcing contract.> Download: Strategic Planning Kit for Businesses” class=”gh-styles-m__figureContainer-image” src=”https://no-cache.hubspot.com/cta/default/53/080dde4f-7b1c-4294-8c28-95e338dd7460.png” title=””/>The social, economic and demographic context extends the field of application of outsourcing: the areas of customer relations, IT or even accounting are no longer the only ones concerned; more and more positions justify evaluating the advisability of a service agreement rather than an employment contract.

From an economic point of view: an external professional performs work on behalf of the company, the human resources assigned do not count in its workforce and the material resources used do not enter into its assets. The company, with a view to results, creates value without possessing the means. From a legal point of view: the company prefers a service contract to an employment contract.

What are the pros and cons of outsourcing?

Carrying out an activity internally or via an external service provider is a key decision in business strategy. The company chooses to outsource for the following reasons:

  • The cost savings on wages and social charges is the first advantage of outsourcing. While this argument is particularly valid when outsourcing is accompanied by offshoring, the fees invoiced by the external partner are in practice often aligned with the cost generated by an employee. However, the savings are measured in terms of land: by using an external service provider who works in their own offices, or at their home, the company saves on workspace.
  • Outsourcing allows the company to focus on its core business. Illustration: the clothing brand, to focus on the development of innovative materials, entrusts its digital marketing strategy to a specialized agency; thus, it does not bother with the recruitment of ad hoc skills, and it does not invest in the necessary tools. This advantage of simplicity is particularly appealing to VSEs and SMEs who wish to preserve the moderate size of their structure.
  • Outsourcing is an effective solution in a context where new professions are emerging, particularly with the advent of digital uses. The company indeed must be ultra-responsive, but the internal hiring process is often longer than the use of an external service provider. Outsourcing makes it possible to quickly find operational skills immediately.
  • Outsourcing is a practice in line with the trend of on-demand services, which offers the advantages of flexibility and freedom. The company adjusts its service contract according to its needs, without committing to a lasting relationship as induced by the CDI. Pierre Veltz, engineer, sociologist and French economist, highlights this strong point by recalling that it is easier to separate from a supplier or service provider than to dismiss an employee.
  • Pierre Veltz also praises the merits of outsourcing by advancing the argument of the competitive pressure suffered by external service providers. Unlike the employee, secured over the long term within the framework of an employment contract, the service provider must continually prove himself. He is thus able to offer the company tight turnaround times and an optimal quality of work.
  • Outsourcing, in any case, goes in the direction of the transformation of the employment market: the phenomenon of “Great Resignation” and the rise of the “gig economy” confront companies with a shortage of employees. In this context, it happens that the company does not succeed in recruiting on the basis of salaried workers, in which case it turns to self-employed workers. As proof: in 2021, 61% of startups have more than 30% of freelancers in their workforce. A new form of outsourcing is emerging in response to changing mores.
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However, outsourcing presents risks:

  • The company, within the framework of certain outsourced services, gives the service provider access to confidential data. From a legal and competitive point of view, the company must take care to secure this transfer of information, especially since the service provider is not bound by an exclusivity clause.
  • The choice of partner is crucial. The company in fact orders work to be carried out in its name, its brand image is therefore at stake. Illustration: the outsourced and delocalized call center employs non-natives; customers who call expect to contact the company, but find themselves in conversation with interlocutors who do not speak French well; the company’s image is damaged.
  • Unlike the employment contract, the contract for the provision of services does not create any relationship of subordination. The degree of control over human resources is therefore less, and this lack of control can prove difficult to manage.
  • The company that outsources a function does not capitalize either human resources or material equipment in this area. In the event of the sale of the company, it cannot enhance this function, except to include in the sale solid and lasting contracts with its partners.

To take advantage of the advantages of outsourcing, without suffering the risks, 2 aspects prove to be particularly strategic: the choice of the partner on the one hand, the drafting of the service contract on the other hand.

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What activities can be outsourced?

All trades that do not represent strategic activities for the company can be outsourced.

  • Most companies use a cleaning and maintenance company for their offices: without knowing it, these companies are outsourcing.
  • In the same way, online sales companies mostly entrust their delivery service to a specialized transport company.
  • Outsourcing administration is very common in small structures: accounting, payroll or human resources are essential functions, but for which the company does not wish to invest in time and staff.
  • Legal is also often outsourced by VSEs and SMEs. The need for advice is indeed punctual, and does not justify recruiting on a permanent contract.
  • Regardless of their size, companies and even self-employed people tend to entrust their answering service to an external service provider. The time saved allows them to focus on their core business. Illustration: the osteopath who connects consultations cannot afford to be interrupted by appointments, he delegates the task to increase productivity.
  • When launching an activity, the business creator does not have the time or the skills to take charge of press relations and community management. However, these functions are essential for increasing brand awareness: outsourcing is an effective solution.
  • In a context where technologies and mores are changing rapidly, the digital marketing strategy must be continually adapted. When the company does not have the means to regularly train its teams or invest in high-performance tools, it chooses an agency specializing in digital marketing to outsource the development and implementation of its strategy.
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In the traditional conception of outsourcing, the company calls on a company specializing in a field of expertise, to provide a function over the long term. The concept of outsourcing is evolving and covers extended practices: the company outsources short-term assignments to independent workers who are experts in their field. The objective remains the same: to favor an on-demand service, with a view to agility, simplification, optimization of time and costs. The evolution of outsourcing follows the evolution of the “on premise” software model towards the SaaS model: the company is no longer the owner of the resource, it is content to exploit it.

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