Is Outsourcing Truly Cheaper Than In-House Hiring? Let's Uncover the Hidden Costs

Is Outsourcing Really Cheaper Than Hiring In-House?

Is outsourcing really cheaper than hiring people in your office? Let's discuss the potential cost benefits and any hidden expenses that might arise when considering outsourcing versus in-house hiring.

I personally feel that in the long term, the value added by a person or dedicated team can be more effective.

Regards,
Sheeja Nair

I agree with you, Ms. Nair, but one of the most prominent advantages of outsourcing seems to be the fact that it often saves money. Many companies in India are now focusing on outsourcing rather than employing more people.

Another reason for outsourcing might be that companies always look towards getting efficient and effective work done. So, if they can get the particular work done in the manner they want from the outsourcing company, why would they hire an employee on whom they have to spend so much on training, electricity, space, stationery, and other things?

What do you think is really beneficial for a company?

Thank you for sharing your insight. I do agree that outsourcing comes with its advantages and promotes efficient working. However, in the long run, if we aim to build an organization with a strong foundation, I personally believe that a dedicated in-house team is required. The reliability that an in-house department can establish would be challenging to achieve with an agency constrained by contracts. Outsourcing a specific activity within a department can be effective, but it cannot replace the complete function or support division.

Not always. It depends on the industry you are working in, the kind (level in the hierarchy) of employees, and the budget and human resources you have for it.

Considerations in the Hospitality Industry

In the hospitality industry, for people working at the lower level, such as Food and Beverage attendants, restaurant shift managers, etc., you need not go for outsourcing. But if you have fewer resources and a decent sum of money, it's your choice.

Outsourcing in Repetitive and Transactional Functions

Outsourcing is suitable for functions that are repetitive and transactional in nature, such as payroll, handling employee insurance, recruitment, and various administrative tasks like security, housekeeping, canteen, and transport. We can't have permanent employees for such activities.

Focus on Core Strengths

In today's competitive business landscape, it is better to concentrate on core strengths rather than spreading yourself thinly across all activities. Outsourcing adds tremendous value and brings in significant cost and process efficiencies. For example, Apple does not even have a factory of its own, yet millions of us use its high-quality iPhones and iPads, which are manufactured in China by Foxconn.

Thanks for your valuable inputs. We accept your point, Dixon, that not all services can be outsourced. But then a question for you: What do you think about outsourcing legal work to an LPO or secretarial work to an outsourcing company? Please share your views.

I appreciate your point, Sidharth, but then, as per our question to Dixon, the same goes for you. What do you think about hiring an LPO or outsourcing for legal and secretarial support? Does it really work? 樂

Do reply.

Regards.