COVID-19 and its impact on outsourcing
The year 2020 emerged as the worst time in human history. The whole world is suffering from a pandemic known as COVID-19. All the economies around the globe are shattered because of this pandemic, and businesses are closing. The whole scenario has also affected the outsourcing industry.
There are different forms of outsourcing services. Some of the worth mentioning are listed below.
• IT Outsourcing
• HR Outsourcing
• Backoffice Services
• Call Center Outsourcing
• Accounting Services
• Quality Assurance
• Market Surveys
• Data Entry
• Logistics Outsourcing
What is an Outsourcing Company?
The purpose of the outsourcing companies is to facilitate the businesses by providing expertise in the niche. Companies utilize outsourcing to lower their burden so they can focus on the main goal and improve their businesses.
So, you can see that the revenue of these outsourcing companies is dependent on the proper functioning of primary businesses around the globe. If these primary businesses are not working fine, then there can be some severe repercussions for these outsourcing companies are well. You can also find the advantages and disadvantages of outsourcing by clicking on this link.
COVID-19 Impact on Outsourcing
Just like most of the businesses around the globe, outsourcing is also affected by the COVID-19 pandemic. Here are some of the most significant impacts on the outsourcing industry.
As most of the cities around the globe are under strict lockdown, the logistics companies are not able to work efficiently. This primary revenue of this outsourcing sector was dependent on transferring the goods promptly. However, with severe global conditions, they are unable to perform their job.
This has lead to a massive hike in the cost of transporting goods because the profits of this business model were based on the economy of scale. However, with lower business activities, they are forced to increase the prices for their continuation.
The lockdown situation has led to the deficiency of human resources. People are not allowed to leave their area and even their homes in some cases. Some parts of the work could be done remotely; however, physical presence is also required to complete the job. Industries like IT and Consultancy are able to manage through video conferencing.
However, some sectors like textiles and logistics companies are suffering a lot in outsourcing their needs.
Projects on Hold
No one was ready for such a global tragedy. For this reason, the ongoing projects went on hold abruptly. So, a lot of money invested by companies in outsourcing their needs during this time is stuck, which a headache for them.
Absence of Equipment and Infrastructure
Although most of the outsourcing companies allowed their employees to work from home, the quality of work has suffered a lot because of unsatisfactory work from home arrangements. This is creating some serious problems for the day to day operations of these outsourcing enterprises.
This pandemic came out of nowhere, and no one was expecting it to be that severe. Therefore, the current system was not ready to cater to this challenge adequately. Most of the outsourcing business models are based on effective commutations. Without this, it is difficult for them to carry on the operations.
Many outsourcing companies, like market surveys, depend on physical interaction with people. It gives a sense of clarity to these people because they can fill the survey through natural response in a face to face interaction. However, the quality of this work has suffered a lot all because of physical absence.
People do not fill it in one go, and most of the responses are not natural (filled just for the sake of it). Similarly, the telemarketing people are also suffering from the inconsistency of the work. They are not able to get the clients on the call, as most of them are working from home. The only way to reach them out is through email, which may go into spam and not an effective way of marketing their product or service.
Cancellation of Orders
The main concern for the outsourcing industry is the cancellation of the orders they received from the client companies. This is mainly because of the shutting down of operations by primary companies to which the functioning of outsourcing is concerned.
If the primary companies are not getting anything from the market, they would not be able to utilize the outsourcing services. This has a significant impact on the industry, and you can see the after-effects in the IT industry. There are massive layoffs from some of the biggest tech giants because they are unable to receive orders from their clients.
Just like outsourcing companies, client companies who use their services are also facing problems in outsourcing their needs. The top issues faced by these companies are:
• High prices of outsourcing services
• No timeline followed which leads to delay in consignments and project
• The inconsistency in the work which is leading to lower quality product
• Ineffective communication by outsourcing partners
Although COVID-19 is a big concern for most of the businesses around the globe, it has a significant impact on the outsourcing companies. These companies act as a helping hand for major corporates and depend on the proper functioning of these corporates.
If the primary companies are not getting enough business, they would not be able to utilize the outsourcing services. It is leading to the shutting down of many outsourcing companies around the globe. The other factors, like lockdown and travel restrictions, are also playing a pivotal role in derailing the businesses that solely depend on it.
Like the logistics industry cannot survive without proper transportation. Similarly, IT projects are also on hold or even canceled, which is leading to an alarming situation of downsizing of companies. Human resources are deficient in some areas as well because of lockdown.
Companies were not ready to take on the challenge of this COVID-19, as no one was expecting it to be that severe. Therefore, there is no proper infrastructure to take on this challenge in an effective way. Similarly, primary businesses also have some complaints from their outsourcing partners like ineffective communication and delays in the deliveries.
In a nutshell, time is hard for the survival of companies across the globe. Everyone needs to understand the financial scenario and show some patience. It is a difficult time, but it is temporary.