Challenges Faced by Small & Medium Enterprises


Over the long haul, large corporations have reaped the benefits of offshore outsourcing. These benefits include reduction of costs, quality, fast turnaround time, on time delivery and customer satisfaction. Realizing the benefits of outsourcing, even small and medium enterprises are jumping on to the outsourcing bandwagon every day. Though there are several benefits of outsourcing, it has some challenges also. Be it a large, medium or small enterprise, when it comes to outsourcing, they all are in the same boat facing same challenges. These challenges include-

Deciding the functions for outsourcing

The first crucial step is to identify whether one actually requires to outsource or not, and if yes, then what are the functions that needs to be outsourced.  First of all, identify weaknesses and strengths of your organization. It will help in you in prioritizing opportunities for outsourcing. It is better to farm out the weaknesses to an expert partner. It will give you an opportunity to focus on innovation and market strategy. An expert company will be helpful in cost reduction and on time delivery of services and product. It is also imperative to decide if contracting out the activity would really be cost effective or not.

Choosing the right location

Location is the second most important point of consideration. Before outsourcing one should decide which location would be appropriate for outsourcing the process or activity. Since India, China and Philippines are big players in outsourcing business; there are always options for your enterprise to decide whether outsourcing to India or China would be a better option or not. You can select the location on the basis of your requirement, suitability and budget. There are several factors that should be contemplated while choosing a location for outsourcing i.e. labor rates, language barriers, workforce availability, culture, distance, government support, political and legal risks etc.

Opting for the right outsourcing partner

Outsourcing is a key part of any company’s cost and supply management strategy. There are several outsourcing providers in the market who proclaim to be the best. It becomes an uphill task to select the right one. SMEs must discern the value of a right outsourcing partner. The risk aggravates more in the case of Small and Medium Enterprises since it is their nascent stage and any negligence on their part may affect their brand value, growth, quality of product/ services, customer satisfaction and profit. Therefore, it becomes mandatory for them to ensure if the outsourcing organization has technical competence and requisite workforce.

 Implementing the successful outsourcing model

After choosing an outsourcing partner, the next challenge for any small or medium enterprise is to establish the relationship and implementing the project successfully. There must be a well-structured Service Level Agreement (SLA).  A well-structured SLA includes relationship, expectations of both parties and project exit strategies. Organization must brood over following questions-

  • How can they ensure the timely and cost-effective implementation of the project?

  • What will be the key performance parameters to monitor the success of the project?

  • What may cause challenges and how to mitigate them?

  • How would you monitor and manage the resources?

Without right planning, decision to outsource may prove fatal for any enterprise especially SMEs. It is also not smart to burden oneself with operations in which one is not an expert. Hence, it is better to outsource your non-core business activities and focus on your expertise and marketing strategies than getting into a catch-22 situation.


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