Digital Transformation and Business Process Outsourcing: Pros and Cons

Today, digital transformation and business process outsourcing often go hand in hand.

Digital transformation – and other forms of organizational change – can significantly benefit from outsourcing.

In this article, we’ll look at:

• Some of the biggest benefits of outsourcing
• A few disadvantages to be aware of
• When to outsource – and when to avoid it
• Digital transformation solutions that can be outsourced

Let’s start with the advantages of outsourcing.

Digital Transformation and Business Process Outsourcing: The Benefits

Benefits of outsourcing include:

• Specialized support from a group of experts. Specialized functions, such as artificial intelligence or change management, require expertise and talent. Having such talent on-demand can offer a significant leg up.
• Services that are priced affordably. Outsourcing, in the short-term at least, can cost less than developing in-house functions. And, in certain business circumstances, it can also be more affordable in the long run.
• On-demand solutions that can be customized as needed. Many vendors can customize their offerings to meet client needs. Some will stick to specific “packages” or services, but these can typically be tailored to a certain extent.
• Access to business functions without hiring new staff. Outsourcing helps businesses avoid recruitment of new employees. This allows companies to access new business functions quickly, without scaling up or impacting other business areas.
• Freeing up staff time to focus on the core business. As a business scales, its needs also scale. But when existing staff take on this new work, they are pulled from their core duties. Outsourcing allows employees to stick with their specialties.

Perhaps this last point is the most pertinent.

Businesses shouldn’t attempt to scale beyond their means. 

That is, it can be easy to overextend, creep outside the mission scope, and spread resources to thinly. 

Outsourcing can help a business and its employees stay focused on its core mission.

However, outsourcing definitely comes with its own disadvantages.

Drawbacks of Outsourcing 

Outsourcing is not a perfect solution to digital transformation challenges, of course.

It does come with drawbacks, such as:

• Quality control. Vetting is a necessary step when choosing vendors and providers. However, quality can still be an issue. This can be due, for example, to some of the other issues mentioned next.
• Communication problems. Because outsourced workers don’t work within an organization, communication can inherently be more difficult. Depending on the arrangement, communication time can also add to costs.
• Security risks. Every extra wheel adds a potential attack vector for cybercriminals. Outsourcing business solutions, therefore, can open up new security vulnerabilities.
• Limited control over the output. Outsourcing can certainly streamline production, but there can be limitations to the type of services provided, levels of customization, and so forth.

When the benefits of outsourcing outweigh these disadvantages, then outsourcing simply makes more sense.

Let’s look at a few areas that can be outsourced in digital transformation.

Outsourcing Digital Transformation Functions

The digital ecosystem has exploded in recent years.

There are countless business functions that are being transformed, from business models to processes to technology infrastructure.

Below are some examples of digital transformation functions that are commonly outsourced:

• Automation. Automation, such as robotic process automation (RPA), can greatly increase efficiency, reduce process costs, and decrease production timelines.
• Culture. Cultural transformation is a crucial part of digital transformation – to succeed, companies must become more innovative and digital-friendly, for example.
• Digital strategy. In today’s digital economy, every business must have a digital strategy. They should also develop a strategies such as a digital adoption strategy and a digital transformation strategy.
• Industry-specific solutions. Some digital transformation providers offer solutions specific to a specific market, such as healthcare, supply chain management, aerospace, and so forth.
• Consulting. Consultants can guide businesses, offer training, support, coaching, and on-demand expertise. This approach allows organizations to develop internal functions without relying too heavily on outsourced support.
• Security. Cybersecurity is an absolute must in the digital ecosystem. Certain security solutions absolutely must be outsourced – after all, only specialists can keep up with the fast-paced world of cybersecurity.
• Digital adoption functions. Digital adoption is a fundamental part of every digital transformation process. Every business must adopt new technologies, implement new software, onboard and train employees, and so on.
• Change management. According respondents in a survey by the digital transformation consultancy Jabil, organizational and cultural changes are more difficult than technology changes. For this reason, many organizations should strongly consider hiring change management support.
• Employee training. Digital adoption platforms, for instance, offer an employee training solution that simplifies software adoption, increases productivity, cuts costs, and more.

This list is by no means exhaustive.

If there is a business need, then it can certainly be outsourced, at least to a certain extent.

Every organizations should weigh the pros and cons of outsourcing. 

After all, given the fast-paced nature of today’s digital economy, keeping up with global digital transformation may require a certain amount of outsourced support.