Pros & Cons of Outsourcing Vs Hiring Local Businesses

The Internet has made communication so much easier and effective. Businesses are now able to harness that power to outsource even the smallest tasks of their business to other countries for cheaper rates because labour is cheaper in these countries than in Australia (source: Trading Economics)

Within the past decade, we have seen businesses outsourcing certain parts of their operations to companies both overseas, with the bulk of the outsourced work going to known outsourcing hubs like India and the Philippines.

So what are the pros and cons of outsourcing your business tasks overseas? There are certainly 2 sides to the equation. On the one hand, this can be an effective solution for business owners (especially independent contractors) who do not have a lot of funds and would like their work to be done on a budget. On the other hand, communication issues can be quite common when outsourcing to countries where English is not the spoken language. Additionally, you are also running the risk of quality, which is a bit of a hit or miss in these situations.

This video explains why outsourcing is something you should consider carefully and how it is not almost the best way to scale a business:

While outsourced telephone support for customers started the outsourcing industries in both countries, outsourcing is not limited to that aspect of business. And you will find that there are outsourcing companies that headhunt, do accounting work, and make programs for their clients, among other types of work.

Outsourcing has led to the cutting of costs and consequently, an increase in profits, as salaries for workers in the Philippines are only a fraction of what workers in the United States and other countries are paid.

But the low cost is often offset by the challenges set by outsourcing. And what are these challenges? One is communication. You might think that as English speakers the people in the Philippines and India would be on the same page with their counterparts in the United States, however, the truth is that there are times when frustration gets the better of clients because ideas are not as well communicated as they would have been if the one handling them didn’t work the night shift (to adjust to the time zone of the customers), and the customer service representative had the language skills of an English native speaker.

picture of a frustrated business owner

Communication skills aside, though, there is the matter networking. Working with an outsourcing company means that the relationship ends when the work is done. This is so unlike when you are working with a local company where face-to-face conversations can lead to an ongoing long-term business relationship that opens to new networking opportunities.

Hiring local companies and businesses will always fare better in the long run, especially for services where communication is important for the end delivery. Furthermore, when you hire a local business as a business owner yourself, you are expanding your network and building relationships with other businesses that may pay off in the future, by way of referrals and connections. Business owners are always looking for referral partnerships and a great way to build these is by doing business with others!