Outsourcing of activities by means of contracting out
Anyway, is outsourcing recommended? The short answer is yes, as the
positives of this management strategy are more significant than the possible
negative results. In our opinion, it is more important that the positives refer
to all persons having any relation to the activity outsourced. That is why, we
shall answer the question from the point of view of the assignor, the new
contractor, the persons engaged in the outsourced activity and third parties.
1. The
reasons for implementation of this management strategy for restructuring and
optimization are most numerous for the assignor, of course. The practice brings
forth the following reasons:
Concentration of the company on its essential/core
activity;
Personnel restructuring;
Decrease of the exploitation expenses and better control of
them;
Market flexibility and accelerated market realization;
Establishment of a flexible expenses structure;
Access to better opportunities;
Improvement of the quality of the activity outsourced;
Liberate capital and funds available for other purposes;
Promotion of innovations;
Increase revenues;
Getting free from a difficult to manage activity;
Decrease/sharing of risks related to the outsourcing activity;
As with every management process, outsourcing creates some risks for the
assignor. The risks are as following but not limited
to:
Loss of direct control over the activity outsourced;
Temporary increase of expenses – although commercially feasible the assigning
contract and the inevitable changes related to it may bring forth expenses
bigger then those made prior the outsourcing;
Need of permanent control over the performance of the contractor so that quality
of the service/ production subject to the outsourcing is guaranteed;
Impossibility/enhanced complexity for returning the outsourced activity back to
the assignor;
Risk that the outsourcing is not very successful due to specifics of the
activity – certain activities hardly yield to this management strategy because
of their scope or complexity;
Long-term engagement with the new contractor;
2.
Although it is not always obvious, outsourcing offers certain benefits for the
contractor, apart from broadening its activity. The contractor
receives:
A “ready for management” activity with established relations, terms and rules
Personnel trained and experienced in the activity, open for development, not
training.
3.
There is no doubt that outsourcing brings benefits for the employees engaged in
the activity. Following article 123 of the Labor Code:
It is guaranteed that their labor relations remain under the same conditions
although the employer is different;
The Collective Labor Agreement, if any, remains in effect for the new
employer;
Keeping the factual place of work also has a purely psychological impact on the
employees, which is usually underestimated;
New possible benefits for the employees as result of the negotiations between
the assignor and the new contractor;
4.
What is good for third parties having relations with the assignor in respect of
outsourcing is that relations remain as they are. Regardless of whether
they are clients, suppliers, etc. of the activity outsourced, in principle,
relations with third persons continue. Third parties being clients may benefit
from the better quality of service/product as result of the
outsourcing.
The above makes it clear that outsourcing of an activity is an extremely
feasible management tool for restructuring and optimization of the company
limiting the negative effects for all persons that may be influenced by it. This
strategy provides an opportunity for the outsourcing company to implement
successfully new ideas and concepts for the business and to make the company
more efficient and better controlled. Outsourcing offers a chance for companies
to get the right combination of people, processes and procedures for sound
business results, without creating surplus burden for their budget.