In
addition to cost savings, companies can employ an outsourcing strategy to focus
on core aspects of a business. Outsourcing non core activities can improve
efficiency, streamlining and productivity because another entity performs these
smaller tasks better than the firm itself. This strategy may also lead to
faster turnaround times, increased competitiveness within an industry and the
cutting of overall operational costs. Businesses can reduce labor costs
significantly by outsourcing certain tasks, while companies may simultaneously
have access to technology without investing large amounts of money to own the
technology.
Advantages.
Many
businesses find outsourcing the functions of human resources, such as payroll
and health insurance, saves enormous amounts of time, effort and energy. HR is
one of the non core functions of a firm; other companies may have experts to
help with this aspect of human capital. As many as 16% of companies outsource
some kind of task that deals directly with human resources.
Disadvantages
Outsourcing
also has several disadvantages. Signing contracts with other companies may take
time and extra effort from a firm's legal team. Security threats occur if
another party has access to a company's confidential information and then the
party suffers a data breach. A lack of communication between the company and
the outsourced provider may occur, which could delay the completion of
projects.
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