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Advantages and Disadvantages of Outsourcing


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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 benefits:

(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 together.

(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 their depots.

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 dependency.

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 enterprise.

Peter Carter owns the popular blog where he discusses a number of topics relating to making money from home.


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