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Pros and Cons of Outsourcing

written by: Aunindita•edited by: Linda Richter•updated: 12/26/2010

Outsourcing is the in-thing in the market, and everyone seems to be talking about the advantages of outsourcing. But every coin has two sides. It's better to know about the cons of outsourcing as well before you actually go ahead with it. The article discusses all the aspects of outsourcing.

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    There are many advantages of outsourcing, and in today’s global economy, more and more companies are looking overseas to find their workforce. Although this option may seem ideal, it is essential to consider the advantages and disadvantages of outsourcing.

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    Pro: Lower Operational Costs

    investment A key element in deciding to outsource is reducing the overall cost of doing business. One of the many benefits of outsourcing is that it allows business owners to free up capital which can then be reinvested in their business, or invested elsewhere. Furthermore, it allows you to avoid large expenditures that, if your business is still new and developing, could make or break you. Regardless of the size of your business, it is always important to reduce costs when it is practical to do so.

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    Pro: Low Labor and Training Costs

    Home office In addition to reducing overall overhead, outsourcing projects can substantially reduce the cost of the ongoing business of training and payroll. By cutting the costs of training employees to do short-term work and other tasks, you can focus your capital resources on the area of your business that may require additional funding, such as marketing, development, or even human resources.

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    Pro: Superior Technology

    Generally, there are many benefits attached to small business outsourcing. Although it will depend upon the market you are outsourcing to, it is possible that there is technology available abroad that is not yet available in your home country. Another of the pros of outsourcing and taking advantage of these new technologies is the opportunity it gives smaller or newer businesses to compete alongside much bigger fish.

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    Con: Less Security

    The advantages to outsourcing may be substantial, but it is important to consider the disadvantages of outsourcing as well. One key disadvantage is the reduced security of information and records. Outsourcing logically leads to dissemination of company information to the outsourcing agent. With confidential information in the wrong hands, there could be a substantial risk of loss.

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    Con: Lack of Quality Control

    quality control The old adage that you get what you pay for may very well apply to outsourcing. When the outsourcing agents are focused on cutting their own costs in order to increase their profits, it is only natural that the products they create will suffer. Because outsourcing substantially reduces your oversight, there is little to do. So long as the product meets the contract requirements, you are obligated to pay for a product that is inferior.

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    Con: Language Barriers

    language It may be a global economy, but there is no international language. Wherever there are two different native languages involved, there are bound to be logistical issues in communication. Whatever safeguards are used to ensure adequate communication could create hidden costs of doing business overseas, such as paying for interpreters or other services.

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    Conclusion

    There are many advantages to outsourcing. The decision, if made with full information, can lead to higher productivity and increased profits. It is important, however, to do the research and consider all the possible downsides and complications. That means investigating laws, policies, demographics, languages, security risks, and many other issues. But, when all is said and done, the advantages of outsourcing could very easily outweigh the disadvantages.

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    Resources

    References:

    Society for Human Resource Management. The outsourcer's guide to success, retrieved at http://www.shrm.org/hrdisciplines/Pages/CMS_023325.aspx

    Images:

    http://farm4.static.flickr.com/3042/2625860479_eb7827530b.jpg

    http://www.flickr.com/photos/_fabio/104792456/

    http://4.bp.blogspot.com/_5MzkJkgHQEI/SLhu0qCHVNI/AAAAAAAAApk/ya7gjVfpx50/s320/Croatia+037.JPG

    http://upload.wikimedia.org/wikipedia/commons/f/fe/Flickr_-_The_U.S._Army_-_Breaking_down_language_barriers_during_Operation_Silver_Creek.jpg