The Pros And Cons Of Outsourcing

The concept of globalization has emerged as the fundamental factor in the business life. Globalization affects the economy, society, business life as well as the environment. The changes occurred from globalization are leading to the competition related to product & service efficiency and responsiveness. The quick response and minimizing cost of product & services call for outsourcing which is widely accepted by the companies & corporations. Outsourcing refers to the transfer of responsibility for producing a product or service to an outside vendor or provider. Outsourcing may be performed domestically or internationally to execute the business activities. An organization may outsource services for operational efficiency, for tactical support

A specific business process or service is allocated to an external service supplier through outsourcing (Ghodeswar, 2008). Embracing outsourcing a company can save their cost and can make control of a specific service. Companies undertake outsourcing with a view to reduce the workload on their employees and to supply development facilities to perform other moneymaking projects (Power, 2004).Outsourcing permits firms to concentrate its limited staff on work that is at their core of the organizational development. Outsourcing helps to achieve greater financial flexibility. Outsourcing of information technology and computer programming paves the way to acquire new technology and expertise of outside (Lonsdale C, 1998).Firms can deduct the cost relating to outsourcing from their current income. Outsourcing enhances a level of continuity to a company and at the same time reduces the risk associated with the

The risks related to the outsourcing are given below: During outsourcing internationally the risk of security breaches or compromised intellectual property rights are frequently raised (Krell, 2007).In outsourcing it happens that a vendor may fail to deliver the service as expected one. This increases the level of risk highly. Different level of government regulations is faced by the utilities, healthcare institutions and financial institutions during outsourcing. Firms require complying with government rules and regulation mostly (Abdul-Aziz AR, 2004).Culture refers to the way of living of peoples. It involves religion, mode of dress, social activities etc. During outsourcing an organization may face the risk of cultural shocks. A dynamic market is created because of the growth among outsourcing vendors (Smith, 1998). A high turnover rate creates a great impact on the client organizations by forcing it to increase time spent in transferring knowledge and training new individuals. Outsourcing faces the risk of fluctuation in production by the vendors.

Outsourcing generates more advantages over the disadvantages. To get the full benefits from outsourcing an organization or a company requires considering the potential pitfalls related to changes, benchmarking, service level, disputes and competitive procurement carefully and effectively.

In fine it can be said