Outsourcing in general can be defined as passing of service provision or production to another internal or external party. The chief reason of outsourcing is to reduce capital expenditure over a business process. Also management gets more time to concentrate over core competencies. This also reduces the dependency upon internal resources and increases the flexibility to meet the changing business and commercial conditions.
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Even though several other reasons can be listed up in favor of outsourcing, one must not overlook the disadvantages of it.
By outsourcing a business process, we tend to loose the managerial control. This happens because it is harder to manage the outsourcing service provider as compare to managing one's own employees. Also because we generally tend to skip (or miss to calculate) the
potential hidden costs of outsourcing which includes legal costs of putting together a contract between companies and time spent on coordinating the contracts, we feel that outsourcing reduces the overall expenditure of a business process, one of the major reasons why a company goes for outsourcing. This hidden and missed out costs of outsourcing is hard to predict causing overall costs to be underestimated.
Another disadvantage is that outsourcing can also prove to be a threat to the security and confidentiality of issues of a company. If your company is outsourcing business process such as payroll, confidential information such as salary will be known to the outsourcing service provider. Therefore one must be very careful in choosing which business process to outsource and which one not.
Outsourcing may also result into the possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings. Loss of internally generated talent is yet another problem associated with the outsourcing as it may hamper the growth of an employee by depriving him from the experience he would have gained by handling the business issue himself then by passing it over to some other external party.
Thus before a company decides to outsource its business process, it must examine all the factors carefully. It may not happen that outsourcing becomes a reason for company to regret later.
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Short explanation but direct to the point thanks
Migx
August 28th, 2007
Wonderful summary,i will like to read more materials from you.
Alex
November 16th, 2007
i've seen the same content from 2 different sites..points are exactly the same..Wonder who copies who?
k3ff
December 1st, 2007
This is the one and only
more pages are ripped from this site… darn the internet.
Bas
December 1st, 2007
Cheerz mate - it's useful.
core
December 3rd, 2007
dude u are so right you rock.
mitch
December 19th, 2007
so true, short straight to the point summary
pamela
February 12th, 2008
straight to the points.
xin
March 8th, 2008
great info. thanks alot =) Helped alot for my assignment ^^
yin
March 26th, 2008
cheers or saink, been lookin for some disadvantages for ages to help with my assignment
CHEERS
matt
April 30th, 2008