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Advantages And Disadvantages Of Outsourcing Essay

946 words - 4 pages

Advantages and Disadvantages of Outsourcing
Outsourcing is an allocation of specific business processes to a specialist external service provider. Most of the times an organization cannot handle all aspects of a business process internally. Additionally some processes are temporary and the organization does not intend to hire in-house professionals to perform the tasks. Once the task is outsourced to the service provider, he will take the responsibility of carrying out the tasks and maintaining the organization’s assets. However prior to outsourcing any component of your business to a third-party vendor, it is essential to understand the advantages and disadvantages of outsourcing. ...view middle of the document...

Outsource to a firm specializing in medical billing. Also, overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily. For example, growth has resulted in an increased need for office space. The current location is very expensive and there is no room to expand. Outsource some simple operations in order to reduce the need for office space to outbound telemarketing or data entry. Meanwhile, Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available. For example, an information technology department that has too many projects, not enough people and a budget that far exceeds their contribution to the organization. A contracted outsourcing agreement will force management to prioritize their requests and bring control back to that area.
One of the biggest disadvantages of outsourcing is undesirable results. This is especially true when a company hires a third-party vendor to mass produce a product. In the event that the finished products do not meet quality standards, and the manufacturing process must be repeated by a different vendor. Not only is this a waste of time and materials, it can also be very costly for the company who outsourced the project. They are essentially paying twice for the same job. In addition there is always the possibility that the company may lose sales, during this same period because of the lack of available product. Another disadvantage of outsourcing is a loss of jobs. Many times work is outsourced simply as a means to save money. Outsourcing to a foreign country typically saves a company a great deal in wages. So, the choice is made to reduce their local workforce, at the expense of the laid-off employees. In...

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