The Advantages and Disadvantages of
Outsourcing
What
is Global Outsourcing?
Outsourcing is an allocation of
specific business processes to a specialist external service provider. Most of
the times an organization cannot handle all aspects of a business process
internally. Additionally some processes are temporary and the organization does
not intend to hire in-house professionals to perform the tasks.
Once the task is outsourced to the
service provider, he will take the responsibility of carrying out the tasks and
maintaining the organization’s assets.
However prior to outsourcing any
component of your business to a third-party vendor, it is essential to
understand the advantages and disadvantages of outsourcing. Although
outsourcing presents a variety of benefits to your organization, it could also
pose difficulties if not outsourced to the right service provider.
The most commonly outsourced streams
of business include:
- IT outsourcing
- Legal outsourcing
- Content Development
- Web Design and Maintenance
- Recruitment
- Logistics
- Manufacturing
- Technical/Customer Support
Why
do organizations outsource their business process?
The key factors which have led to a
growing trend of outsourcing are
- Lack of expert-labor in some portions of the business process
- Availability of cheaper labor, whilst not comprising on the quality of output
- Ability and feasibility to concentrate on the other crucial business process
These factors have specifically
contributed to most of the outsourced partners across different locations in
the world. Expertise in communication capabilities, technical expertise and
favorable financial packages are the most important advantages of outsourcing
to India.
Advantages
and Disadvantages of Outsourcing
Outsourcing most commonly known as
offshoring has pros and cons to it. Most of the time, the advantages of
outsourcing overshadow the disadvantages of outsourcing.
The
Advantages of Outsourcing
- Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in their field. The outsourced vendors also have specific equipment and technical expertise, most of the times better than the ones at the outsourcing organization. Effectively the tasks can be completed faster and with better quality output
- Concentrating on core process rather than the supporting ones: Outsourcing the supporting processes gives the organization more time to strengthen their core business process
- Risk-sharing: one of the most crucial factors determining the outcome of a campaign is risk-analysis. Outsourcing certain components of your business process helps the organization to shift certain responsibilities to the outsourced vendor. Since the outsourced vendor is a specialist, they plan your risk-mitigating factors better
- Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire individuals in-house; hence recruitment and operational costs can be minimized to a great extent. This is one of the prime advantages of offshore outsourcing
The
Disadvantages of Outsourcing
- Risk of exposing confidential data: When an organization outsources HR, Payroll and Recruitment services, it involves a risk if exposing confidential company information to a third-party
- Synchronizing the deliverables: In case you do not choose a right partner for outsourcing, some of the common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate categorization of responsibilities. At times it is easier to regulate these factors inside an organization rather than with an outsourced partner
- Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat
- Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple organizations at a time. In such situations vendors may lack complete focus on your organization’s tasks
With all these pros and cons of
outsourcing to be considered before actually approaching a service provider, it
is always advisable to specifically determine the importance of the tasks which
are to be outsourced. It is always beneficial for an organization to consider
the advantages and disadvantages of offshoring before actually outsourcing it.
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