Advantages and Disadvantages of Outsourcing
Outsourcing is an arrangement wherein a company subcontracts services to
another company. The aim of this is, if not to cut costs, to employ
skills that are not available in-house. Today, the increase in the number
of outsourcing companies has put outsourcing in the spotlight, and
debates on whether it is undesirable or desirable have been many. Summing
it up, a lot of commercial companies are all for it, while employee
unions are often against it.
Business enterprises usually opt to go for outsourcing for the following
(1) Cost savings, including cost re-structuring. Businesses become
successful when they are able to minimize costs, and outsourcing provides
this advantage. For example, an automobile company can cut on their
expenditures if they buy the parts they need, and simply put them
(2) Quality control. By outsourcing, companies are able to tap better
into pools of expertise and gain access to intellectual property, as well
as sustainable sources of skills. Moreover, this method avoids the time-
consuming process of training to develop the particular services in-
house. Also, by providing new service-level agreements in their
contracts, enterprises are able to make sure that the quality of the
outputs or products isn't lost. These contracts usually contain penalties
or legal redress for transgressions.
(3) Time-related advantages. It is possible that services are made
available everyday, at any time of the week. This is achievable because
the services can be done in different locations with time zones. When the
organization from Country A goes off-duty, the organization from Country
B can take over. Not only that, a product can also be speedily developed
and marketed because of outsourcing.
Going back the automobile company example, they can stock up on the
different parts of cars in their warehouses, and just assemble. There is
no time needed to manufacture the parts, and they are always at hand in
Unions, on the other hand, argue that outsourcing harms a local labor
force. Outsourcing results in fewer jobs, and this can be observed
everywhere. This happens because services that can be done in home
organizations are now shifted to other locations, especially to countries
that work for cheaper labor.
Consequently, the labor rates will decline, especially since there will
be competition for jobs. Unemployment will definitely affect a country's
economy. There are also some complaints that the true business value of
services aren't realized and so aren't paid enough for. Some take it
further and call it exploitation of lower-paid employees.
In another angle, language barriers are eyed as being detrimental to the
quality of service. When the services are drawn from places with
different culture or when the first language is dissimilar, it could do
more harm than help.
Furthermore, it is possible that since data is moved around, leakages or
even misuse of information can happen. There was a case before of bank
accounts being tampered with when call center workers were able to get a
hold of customer accounts.
There also exist claims that outsourcing is actually counter-productive,
and that instead of purchasing actual technology to improve the company,
enterprises are instead, resorting to outsourcing. This could lead to
In conclusion, there are two sides to a coin. To outsource or not is up
to the company. Whatever methods they choose have both good and bad
effects, although the good part will mostly be enjoyed by the business
Peter Carter owns the popular blog http://www.make-cash-on-the-net.com
where he discusses a number of topics relating to making money from home.