Outsourcing Advantages and Disadvantages

The dynamic business environment is very complex with a high level of competition on many levels. This leads to establishing complex deliverables, objectives, and operations so businesses can thrive, succeed and achieve a higher level of performance and returns. The increasing competition in business leads to seeking and investing in more complex engineering and construction projects in the construction industry.

Due to these complexities, the necessity to hire specialized experienced people, professionals, and businesses is becoming mandatory to achieve the desired goals, business objectives, and drive the successful delivery of businesses and projects to be able to compete on the global level and/or cover their lack of in-house specialties. With that being said, the term outsourcing comes to play.

So, what does it mean to outsource?

Outsourcing is a business practice, used by many businesses and corporations to hire external resources and expertise that aims to deliver specific scope. Those resources are being hired either locally or internationally from different companies, corporations, manufacturers, industries, etc, to provide the required needed resources, including human resources, specific services, or products to enhance the business operations and performance and ensure achieving successful deliveries, among others. This strategy can be achieved through either procuring the services and entering into contracts or on a higher complex level, businesses can seek different approaches such as joint venturing or partnering, etc. with other businesses, based on different and more complex considerations.

In construction projects, outsourcing is very common and can be noticed on every project, starting from the planning and feasibility stage, all the way through to the operation and maintenance stage and beyond. For example, hiring specialist design engineers for specific systems, consultants, project and program managers, vendors, suppliers, lawyers, accountants, operators, etc. Moreover, outsourcing can be adopted on higher levels than projects, including the program and portfolio levels.

Outsourcing Advantages:

1 - Provide specialization and expertise: outsourcing can be used to hire external resources that cover the lack of in-house required expertise. For example, hiring an engineering firm that specializes in environmental engineering to support and provide their services to the lead consulting engineering firm during the design stage.

2 - Cost efficiency cost savings: outsourcing can be used in cutting costs. For example, if the engineering firm doesn't design and work on many environmental projects, outsourcing a specialized firm can provide a cost-saving solution instead of hiring a full-time environmental in-house engineering team. in some cases, many businesses are outsourcing companies and people, internationally, in other countries where wages are less compared to Canada.

3- Supply products and services to complete the scope of projects per the contracts. For example, hiring suppliers and vendors for construction materials supply and deliveries.

4 - Transfer and/or share the business and/or projects risks. This is depending on the adopted approach and contractual terms.

5- Expanding the business operations and business growth to other industries, sectors, etc. For example, outsourcing provides the expertise to satisfy the pre-qualification criteria to compete on specific complex projects. 

Outsourcing Disadvantages:

1 - Management challenges and difficulties. Having outsourced resources would be more difficult to manage due to the lack of direct supervision, and losing the direct power of controlling the operations as well as performance.

2- Outsourcing may lead to lower quality and may compromise the delivery expectations and satisfaction.

3- Outsourcing may lead to enforce alternative approaches and products due to business complexities.

4- Outsourcing may cause communication issues and/or complicated operations due to business protocols, procedures, etc.