Director for Strategic Development, BDO Unicon Outsourcing
There are certain situations where contractor services won’t help a company and may even harm it instead. Ludmila Shusterova, Director for Strategic Development, BDO Unicon Outsourcing, tells about situations where a company should avoid engaging contractors
You are willing to reduce spending on non-core functions by 2–3 times
If a supplier promises you to reduce your expenses by several times, you should be wary. Indeed, outsourcing reduces expenses, but the fee of the service provider will never be three times lower than the expenses on a full-time employee, because the contractors have to pay taxes, rent an office, and pay for social benefits and personnel training. Furthermore, you should not expect to significantly cut the expenses if you need expertise and not simply manpower.
You are not ready for a change
Outsourcing mostly allows for optimisation of current processes and automatisation of some of the operations. If you are simply willing to replace 10 of your accountants or programmers with contractors, this won’t be an efficient solution.
You can only take advantage of the benefits resulting from the cooperation with an outsourcing company, e.g. a quality control system, if you are doing business with said company as per specific procedures. If you require a customised solution, using the standard quality control processes will be either impossible or extremely expensive.
Regulated processes don’t suit you
The supplier will definitely be regulating all processes and the terms and the results thereof, and will abide by the agreements. For example, the contractor will require you to define the list of employees with access to confidential information.
That’s why outsourcing will be bad for you if your company doesn’t feature regulated processes, your employees don’t have clearly defined responsibilities and authorities, and if anyone can easily access the data on your employees’ wages.
You are okay with shady business practices
Many Russian companies evade taxes, pay under-the-table wages, and don’t officially register their employees as full-time employees. Major service providers value their reputation and won’t support shady business practices. If you are not ready to comply with the laws, you shouldn’t engage contractors: the risk of your secrets being revealed will increase dramatically.
You are used to spontaneity
Providers are well aware that force majeure events happen. But if such events are rather a rule than an exception in your company, outsourcing is unlikely to help. If you submit tax report documents a day before the deadline, if you suddenly request a financial analysis to be done immediately, the services will cost you much more than you expected.
This is not only because a single employee of the provider may be taking care of several companies. Urgency increases the likelihood of error, and discrepancies in reports or wages calculations may result in fines imposed by the tax agency.
You are not ready to give another organisation access to your data
During the early stages of cooperation, some companies are afraid of leaks of confidential information and personal data of their employees. Major service providers value their reputation. In order to protect its customers, the outsourcing company usually signs an NDA, i.e. a document that regulates the availability of project data.
Many major companies comply with the requirements of the ISO 27001 international information security management standards. The access to financial and personnel data of customers is provided only to the teams that work with them. Experts working with personal data use virtual machines that can’t be infected with computer viruses and prevent copying of work data. Usage of copying machines is controlled by the IT Department, and there are other security measures as well.
That’s why, instead of being overcautious, you should assess the risks and ways to mitigate them. If you are not ready to do that, you shouldn’t engage contractors.