Introduction to Outsourcing
Outsourcing is when a company uses another outside company to fulfill goods or services needed for their own company in order to cut costs. Also, it is usually practiced more successfully by larger companies and businesses. For example, one company may use another outside company for call services, email or pay roll because it is cheaper than for them to have an in-house department take care of these tasks. Today there are companies that exist for the sole purpose of performing the tasks that many other companies resort to outsourcing for. Although a good amount of outsourcing does occur in different countries, it is important to remember that not all outsourcing occurs in different countries. Outsourcing can definitely cut costs and give companies a competitive edge but it is not the best resource for every company or organization. Disadvantages to Outsourcing
As we have defined earlier outsourcing is the practice of sending out specific job functions or operations to an outside company or individual. Many companies use this method to help the growth of the business and to save money. These advantages aside there are several disadvantages that could seriously cripple a company. These disadvantages include loss of control, hidden costs, threat to security, quality of service, tying a company’s well-being to another, as well as the bad publicity it could lead to.
One of the few disadvantages is the loss of managerial control. When outsourcing, a company is handing over a portion of their operational control over to another company, the company being outsourced might not share the same values or being driven by the same vision as the outsourcing company. Another disadvantage could be the hidden costs that come along with outsourcing. The contract with the outsourcing company will cover the details of the services they will provide, anything not addressed in the contract could call for the company to pay additional fees or charges. As well as the hidden costs outsourcing could also lead to a threat to security and confidentiality. The company could be at risk by a subordinate at the outsourcing company who doesn’t have the same ethical standards as you company and staff. When outsourcing an organization outsources Human Resources, payroll, recruitment, medical records, and other fragile information there is the risk of it being compromised. This could also hurt the original company’s competitive edge if something like formulas or product blueprints are leaked. Other problems with outsourcing deal with quality of the service provided. The contract made will fix the price of the product leaving the company that is doing to service to decrease expenses in order to make a profit. This leads to the decrease in the quality of the product. Along with a lower quality of product this could lead to lower productivity from poor communication and not understanding the culture of the outsourcing provider. Outsourcing to another company also ties the two companies together financially and connected to each other’s well-being. Handing over an entire part of a company’s operations to another business it automatically tying the two together, if the outsourcing company goes bankrupt that leaves the other company out of luck. Another bad aspect of outsourcing is the bad publicity it could bring to a company from a community, for example if friends and neighbors lost their jobs because they were moved across the country it could hurt the public’s opinion of the company and the morale of the work force as well. Advantages to Outsourcing
Although there are many disadvantages to outsourcing that can seriously hurt a company, if it is done properly and for the right reasons outsourcing will actually help your company grow and save money tremendously. Some advantages include, focus on core activities, cost and efficiency savings, staffing flexibility, and the ability to develop...