Outsourcing is defined by Roberts as turning over to others the provision of goods and services that the firm formerly provided for itself (Roberts, 2007 p 191). Organizations seek to outsource for the purpose of cost reduction. This cost can been seen in terms of time, finances, products and service costs. (Tayaouva, 2012)
Child explains that Outsourcing can offer a number of advantages in principal but in practice it can be seen to provide some disadvantages.
In the long term child explains significant advantages and disadvantages to do with outsourcing. The main advantages he has pointed out are the lower costs in processing goods and services, the service quality, adherence to deadlines, increasing focus on the core competencies, specified skills which the outsourced company may have. (Child 2010).
The disadvantages may include increased costs should an organization expect more, contracts have been signed so it is not easy for a company to go on their own, performance may be reduced by the outsourced company which may be a problem being dependent on outside suppliers.
Alliance One is a large international Tobacco company here in Zambia. They however do not have their own processing factory, they therefore have to rely on a company called Tombwe Processing, which receives the tobacco bales and processes them according to the orders. This has been a long-term outsourcing contract, Alliance One have benefitted immensely from outsourcing, as they have not had the technology or the expertise to carry out these processes. However due to the increased number of Tobacco companies now in Zambia using Tombwe, Alliance One have seen the decrease in outcome return for their Tobacco. Alliance One has now been forced to terminate their contract with Tombwe and open up their own processing factory. Outsourcing worked for them in a time where they did not have the ability to do it themselves however there comes a point in most
References: Books Child, J. (2013), Organization. Contemporary principles and practice, Wiley: Blackwell Publishing Roberts, J. (2007), The Modern Firm. Organizational design for performance and growth, Oxford: University Press. Tayaouva, G. (2012) Advantages and Disadvantages of outsourcing: analyzing outsourcing practices of Kazakhstan Banks. [Online] Available at: www.sciencedirect.com