Pro and Cons of Outsourcing

Advantages of Outsourcing
• Companies can save up on operational costs. In fact most companies can cut their operating costs to half by outsourcing
• Get access to cheaper and more efficient labor
• Cut up on labor training cost
• Get access to better technologies at a cheaper cost
• Increase productivity
• Concentrate on core competencies

Disadvantages of Outsourcing

• The company that outsourcers can get into serious trouble if the service provider refuses to provide business due to bankruptcy, lack of funds, labor etc
• Outsourcing requires the control of the process being outsourced by transferred to the service provider. Thus the company may loose control over its process
• The service provider in developing countries generally services many companies. So there are many chances of partiality owing to more payment by other parties
• The current employees in the company that outsourcers may feel threat due to outsourcing and may not work properly
• The attitude of people in the developed countries against companies that outsource is generally bad

The disadvantages of outsourcing may include the following:

· Loss of managerial control, because it is more difficult to manage outside service providers than managing one’s own employees working possibly in the same building.

· Often the hidden costs are difficult to calculate or prepare for. These include legal costs related to putting together a contract between two companies and the time spent to coordinating the contract. ·

Another disadvantage of outsourcing can be a threat to security and confidentiality. If your company is outsourcing processes like payroll, medical transcriptions or other confidential information, a company must be very careful in choosing which process it wants to outsource and to which provider.

· A possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings may also be a disadvantage of outsourcing. · Other disadvantages of outsourcing may include unfavorable contract lengths, loss of competitive edge, problems in contract renewal, and contractual misunderstandings.