Outsourcing is a normal part of today’s modern economy. Companies and organizations hire services of other companies to do specific works. Not just that, there are a lot of books, articles, literatures and seminars with outsourcing as the topic.
Outsourcing garners both positive and negative feedbacks. It has its own advantages and disadvantages. However, most of the time, the advantages or disadvantages depend on the situation.
Pros Of Outsourcing
Outsourcing has been the source of many debates and discussions by both workers and the media especially in developed countries. These kinds of discussions however may only be temporary and may die down in the near future as the perspective of people mature.
One way of looking positively at outsourcing is the mere fact that it can help companies and organizations cut cost as well as it can give them the edge over other competing companies. Outsourcing also provides opportunities for other people to showcase their skills and talents in producing high quality products.
Basically, the main advantage of outsourcing is in the facet of finance. By outsourcing several functions of a company, operational costs can be cut down. In fact, operational costs can be cut down to as high as fifty percent when outsourcing. Why? First, companies can avail of cheaper but nonetheless very efficient labor. Second, since the company does not need to provide training anymore for a specific function, they can remove the budget for training.
Another pro of outsourcing is getting better results or output. Remember, you are hiring a person or an organization that specializes in a specific task. These organizations have the knowledge as well as the tools to efficiently do a specific task or job.
Focus is also another pro of outsourcing. Instead of the company focusing on non-core functions, they can put all their efforts on the core – the more important aspects of the business. This is because all the non-core functions are already outsourced to other companies.
Cons Of Outsourcing
There are some people who see outsourcing as a disadvantage rather as an advantage but this probably because this idea is quite new especially in newly developed countries. But the truth of the matter is, there are actually several cons in outsourcing.
One of the most controversial aspects of outsourcing is trust. When hiring a certain company for their services, you need to be able to trust them that they will do the job as ordered or that they will provide you with very good results. Trust is also needed especially when it comes to confidentiality. A certain hired company may stab you in the back and sell information to some of your company’s competitors. Though these are rare circumstances, they do and can happen.
To Outsource Or Not To Outsource
To outsource or not to outsource: that is the question. Given the facts – the pros and cons of outsourcing, should your company outsource or not. As have been said, this all depends on the situation. If a company has the ability to stand alone by itself since it has all the tasks covered, then there may not be a need to outsource tasks.
However, if you think that the company needs to put more effort on the core competencies of the company rather than the non-core aspects, then you may opt to go for outsourcing.
Advantages And Disadvantages Of Outsourcing
Outsourcing is an arrangement wherein a company subcontracts services to another company. The aim of this is, if not to cut costs, to employ skills that are not available in-house. Today, the increase in the number of outsourcing companies has put outsourcing in the spotlight, and debates on whether it is undesirable or desirable have been many. Summing it up, a lot of commercial companies are all for it, while employee unions are often against it.
Business enterprises usually opt to go for outsourcing for the following benefits:
(1) Cost savings, including cost re-structuring. Businesses become successful when they are able to minimize costs, and outsourcing provides this advantage. For example, an automobile company can cut on their expenditures if they buy the parts they need, and simply put them together.
(2) Quality control. By outsourcing, companies are able to tap better into pools of expertise and gain access to intellectual property, as well as sustainable sources of skills. Moreover, this method avoids the time-consuming process of training to develop the particular services in-house. Also, by providing new service-level agreements in their contracts, enterprises are able to make sure that the quality of the outputs or products isn’t lost. These contracts usually contain penalties or legal redress for transgressions.
(3) Time-related advantages. It is possible that services are made available everyday, at any time of the week. This is achievable because the services can be done in different locations with time zones. When the organization from Country A goes off-duty, the organization from Country B can take over. Not only that, a product can also be speedily developed and marketed because of outsourcing.
Going back the automobile company example, they can stock up on the different parts of cars in their warehouses, and just assemble. There is no time needed to manufacture the parts, and they are always at hand in their depots.
Unions, on the other hand, argue that outsourcing harms a local labor force. Outsourcing results in fewer jobs, and this can be observed everywhere. This happens because services that can be done in home organizations are now shifted to other locations, especially to countries that work for cheaper labor.
Consequently, the labor rates will decline, especially since there will be competition for jobs. Unemployment will definitely affect a country’s economy. There are also some complaints that the true business value of services aren’t realized and so aren’t paid enough for. Some take it further and call it exploitation of lower-paid employees.
In another angle, language barriers are eyed as being detrimental to the quality of service. When the services are drawn from places with different culture or when the first language is dissimilar, it could do more harm than help.
Furthermore, it is possible that since data is moved around, leakages or even misuse of information can happen. There was a case before of bank accounts being tampered with when call center workers were able to get a hold of customer accounts.
There also exist claims that outsourcing is actually counter-productive, and that instead of purchasing actual technology to improve the company, enterprises are instead, resorting to outsourcing. This could lead to dependency.
In conclusion, there are two sides to every coin. To outsource or not is up to the company. Whatever methods they choose have both good and bad effects, although the good part will mostly be enjoyed by the business enterprise.