Advantages and Disadvantages of Outsourcing

For companies looking for a competitive advantage, outsourcing is a hot topic. The reason is the promise that outsourcing will help a company focus more on it's core competencies.

Here are some of the advantages and disadvantages of outsourcing.

Advantages of Outsourcing

The benefits of outsourcing are:

Less capital expenditure - For example, by outsourcing information technology requirements, a company does not have to buy expensive hardware and software.

Less management headache - For example, by outsourcing business process such as accounting, a company no longer has to hire and manage accounting personnel.

Focus on core competencies - Outsourcing non-core related processes will allow a business to focus more on it's core competencies and strengths, giving it a competitive advantage.

Disadvantages of Outsourcing

Before deciding on outsourcing your company's business process, keep in mind the disadvantages of outsourcing:

Less managerial control - It may be harder to manage the outsourcing service provider as compared to managing your own employees.

Outsourcing company goes out of business - If your outsourcing service provide goes bankrupt or out of business, your company will have to quickly transition to a new service provider or take the process back in-house.

May be more expensive - Sometimes it is cheaper to keep a process in-house as compared to outsourcing.

Security and confidentiality issues - If your company is outsourcing business processes such as payroll, confidential information such as salary will be known to the outsourcing service provider.

Related Websites

This section features more information about outsourcing.

IT Outsourcing
Information resource center about information technology or IT outsourcing. Latest trends and developments in the IT Outsourcing industry, advantages and disadvantages, plus guide to countries and companies that offer IT and business processing outsourcing services.