The Advantages and Disadvantages of Outsourcing
Because of the continuous advancement of technology it is becoming easier for businesses to succeed through the process called Outsourcing. Right now, products and services are sold no longer by just a single dedicated company, but through the collaboration of multiple companies, each providing the type of service they can best offer. However, this setting does have its possible drawbacks. So in order for you to see for your own what works best, below is a comparison of the major advantages and disadvantages of outsourcing.
Focus on Core Activities vs. Total Control of Production. This is really the primary advantage and disadvantage of outsourcing. On one hand, it allows your company to allocate areas of its business which it finds hard to provide (either high-end or low-end tasks) to other companies who can better provide it--leaving you with more time to focus on your core business areas. On the other hand, this runs the risk of having a situation where the contracted company fails to deliver its promised service and leave you swamped with unexpected work.
Cost Reduction vs. Cost of Repair. Hiring more people means higher overhead cost. Naturally, a preferable setting would be to have people providing you with services without having to pay as much as you would have if you hired more people into your company. This is what happens when you outsource. The danger regarding this, however, is that if your contracted company doesn't work to your satisfaction, you might actually have to use more resources to repair the job they have done.
Higher Work Output vs. Loss of managerial control. Because you're using the services of people outside of your company, you can never be sure that your partners are aiming for the same quality of service that you do. Then again, if you have too much projects on your hand but not enough people to do it, hiring more people can easily offset the risk of possible loss of quality.
Peak load accommodation vs. Threat to Security. If you outsource, your company can meet sudden rise in demands, plus you don't need to worry about employee turnover during leaner business periods. One possible consequence of this though is that the information you share can be used to exploit your company's resources. Additionally, you might lose internally generated talent if you assign tasks to people outside of your company rather than to your own direct employees.
Yes, there is a risk in outsourcing. An outsourced company may leave you unsatisfied and having unexpected problems. But acting on the contrary will give you simpler but worse results: slow growth and a small market share. There are disadvantages, but all can be easily overcome with good management and by choosing the right company to outsource (the competition's tough for them too, so they're also trying to best each other). Now you know the advantages and disadvantages of outsourcing--but it really shouldn't be so hard knowing what to do about it.
Focus on Core Activities vs. Total Control of Production. This is really the primary advantage and disadvantage of outsourcing. On one hand, it allows your company to allocate areas of its business which it finds hard to provide (either high-end or low-end tasks) to other companies who can better provide it--leaving you with more time to focus on your core business areas. On the other hand, this runs the risk of having a situation where the contracted company fails to deliver its promised service and leave you swamped with unexpected work.
Cost Reduction vs. Cost of Repair. Hiring more people means higher overhead cost. Naturally, a preferable setting would be to have people providing you with services without having to pay as much as you would have if you hired more people into your company. This is what happens when you outsource. The danger regarding this, however, is that if your contracted company doesn't work to your satisfaction, you might actually have to use more resources to repair the job they have done.
Higher Work Output vs. Loss of managerial control. Because you're using the services of people outside of your company, you can never be sure that your partners are aiming for the same quality of service that you do. Then again, if you have too much projects on your hand but not enough people to do it, hiring more people can easily offset the risk of possible loss of quality.
Peak load accommodation vs. Threat to Security. If you outsource, your company can meet sudden rise in demands, plus you don't need to worry about employee turnover during leaner business periods. One possible consequence of this though is that the information you share can be used to exploit your company's resources. Additionally, you might lose internally generated talent if you assign tasks to people outside of your company rather than to your own direct employees.
Yes, there is a risk in outsourcing. An outsourced company may leave you unsatisfied and having unexpected problems. But acting on the contrary will give you simpler but worse results: slow growth and a small market share. There are disadvantages, but all can be easily overcome with good management and by choosing the right company to outsource (the competition's tough for them too, so they're also trying to best each other). Now you know the advantages and disadvantages of outsourcing--but it really shouldn't be so hard knowing what to do about it.
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