What is Outsourcing? Outsourcing Challenges and Benefits

It all started with the industrial revolution. A valuable element of human civilization was beginning to take center stage in the market during that time.

These are the various elements of the outsourcing industry today

It all started with the industrial revolution. A valuable element of human civilization was beginning to take center stage in the market during that time. An element that relied on helping others prosper, while you achieve success in doing so. In other words, we have come to know of this today as – Outsourcing.

It’s a popular ever-evolving process that is mired in technological innovation. And yet, there are some outsourcing challenges that have to be overcome. This blog will discuss just that and more, Read on.

Table of Contents

What is the defination of Outsourcing?

What is outsourcing

An industrial source defines the term as, “Outsourcing is a business practice in which services or job functions are farmed out to a third party.”

What sets it apart is that the process isn’t limited to geography or a certain industrial sector. Instead, its advantages and mechanism know no bounds and serve anyone in dire need of help.

Though it has become acknowledged predominantly as an IT service, in the present day however it is commonplace with several other business process management as well.

Types of Outsourcing services

Since we have already established that outsourcing is ubiquitous in the industry, there are other wells knows types of outsourcing services that you may not know of:

Manufacturer Outsourcing

Another industry-specific type, manufacture outsourcing forms the base of a production process. Hence, for this reason, it is familiar and widely used by businesses. It revolves around manufacturing products in varying sizes and quantities.

For instance, a cosmetic business might outsource certain minerals or packages from a third party. An automobile manufacturer might outsource to attain specific spare parts necessary to complete cars.

Process-Specific Outsourcing

This is exclusive in the fact that it only aids with certain processes that a business might be struggling with, hence the name – process specific. The said company can outsource operation related tasks to an expert is better versed in it or has the human resource for the same.

For instance, a manufacturer might outsource to a certain firm to supervise and manage its production line because of the lack of human resource or the right skills.


Business Process Outsourcing or BPO is one of the most popular of all the types. It entails the help of a third party to help a certain company with operational tasks of any and every kind. It could be payroll, human resource, sales, or even IT services, the type doesn’t leave any stone unturned.

Project Outsourcing

With multiple necessities that a firm has to keep an eye on every day, it can be quite cumbersome to manage. Handling an overbearing number of projects can be tedious. Hence, certain firms step into project outsourcing, overcoming outsourcing challenges, to ensure the smooth functioning of their preexisting projects.

Offshore Outsourcing

This particular type has been gaining prominence in the recent decade.  In a nutshell, it is just the process of outsourcing that has been moved to a third party from another country or location.

This can also be attributed to the realm of virtual assistants wherein professionals who work remotely to tend to certain tasks that have been delegated by their clients. One of the most notable differences is the fact that companies who divulge in this, is that they are not limited by time. While they shut shop within the given office house, they could still be making business deals. Virtual assistants often work in different time zones entirely.

IT Sourcing

Though this can be easily mistaken for a process specific to the IT sector, it is quite the contrary. It’s just the outsourcing of any IT concerns and services that a business might not have already or lacks the personnel for it.

Tasks such as developing, coding or server maintenance, for instance, fall under this bracket or rather type of outsourcing.

Benefits of Outsourcing for Small Businesses

Benefits of Outsourcing

The advantages that come from outsourcing are innumerable. They are:

Not doing proper research

Research is not restricted solely to the client or just the agency in and itself, it is attributed and is a responsibility for both.  On the client’s side of the wall, not doing proper research would result in doing business with an agency that doesn’t match their standards, and on the agency’s side  it’s their inability to do enough research on the project requirements, wherein the failure to do so, would put the contract at risk of withdrawal or bad reviews from the client. This would prove detrimental to both parties.


Due to myriad factors such as economies of scale and varying labor rates, outsourcing makes for a remunerative investment. If one were to compare the costs in hiring physical personnel to outsource to an agency, they will see a significant change and lower prices in the latter.

Focus on core competencies

By outsourcing menial tasks, it enables the staff or a business owner/entrepreneur to concentrate on relevant and crucial business decisions and processes that require their undivided attention.

Access to expert skills

Outsourcing agencies inculcate a scrutinized selection process to help choose the right employee to assist their clients in their services. Hence, you can rest assured that their quality of work is supreme with profound knowledge in the subject matter as demanded by the projects.

Common Outsourcing Challenges

Common Outsourcing Challenges

Outsourcing challenges are difficult to overcome, and the failure rate of outsourcing relationships remains high. Depending on whom you ask, it can be anywhere from 40 to 70 percent. At the heart of the problem is the inherent conflict of interest in any outsourcing arrangement. The client seeks better service, often at lower costs, than it would get doing the work itself. The vendor, however, wants to make a profit. That tension must be managed closely to ensure a successful outcome for both client and vendor.

Unsupportive clients

It isn’t uncommon that the majority consider outsourcing to be something that requires little to no intervention from them. Yes outsourcing agencies to keep their word and go the job efficiently, but without the necessary help from the clients, in terms of demanding outrageous ‘special treatments’ etc., put the agency in a tiff.

Misunderstanding of the contract

One of the primary concerns of a relationship between a client and an outsourcing agency is the question, “Did they understand the terms of the contract?”. Though the client and the senior executive of the outsourcing agency might have understood the agreement, chances are the staff of both parties might not have the same perspective. This is where most contracts go awry.

Lack of skills

Sometimes it so happens that the agency might not produce the right skills that the client might have asked for or is looking for. So, they do with whatever they have, which would later end up in poor results and performance much to the client’s dismay. This occurs due to poor training or lack of prior experience in the subject matter.

Poor or late deliverables

Outsourcing agencies rely on the fact that they can offer not just quality but quick deliverables. Unfortunately, that isn’t true in reality. The client might give them more than what they can chew on or just simple overestimate their pace and work styles and professes a tight deadline. These two reasons form the crux to this outsourcing challenges.

Poor Time Management

Submitting deliverables on time is just a facet of managing one’s time, the majority of it has to do with how well the entire process has been managed. A slump in the process can affect productivity and the final product or result.

Hence, the management should be aware that streamlining the process would breed better time management in agents.

Issues of health and safety

Sometimes due to negligence, it is quite possible that outsourcing companies can hire unskilled contractors who are unable to efficiently work on site a given project. Their unfamiliarity to the environment or lack of knowledge might lead to physical accidents that might cost a lot to both the agency and the client if this matter isn’t taken care of.

The solutions for these outsourcing challenges are subjective to the scenario that the two parties face with every interaction between them. But this in no way symbolizes outsourcing’s inability to get things done when they need to.

So, if you are out there still wondering if it will do you any good, the answer is YES!

know more>> Why Companies Choose To Outsource Their Tasks To Third Parties

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It all started with the industrial revolution. A valuable element of human civilization was beginning to take center stage in the market during that time.