Advantages & Disadvantages of Outsourcing

Companies have tried to increase their competitive advantages since the Industrial Revolution. However, in the 1950’s and 60’s diversification and economies of scale became the new trend, and in the 1970’s and 80’s those companies who wanted to compete globally, were handicapped due to the complicated management structures that had come into place.

It was not until 1989 that outsourcing became formally recognized as a so called “business strategy”, and from the 90`s the areas such as those below became the focus for outsourcing.

Human Resources

Security

Office and Plant Maintenance

Accounting

Mail Distribution

Recently, developing partnerships and strategic advantages have been used as a means to get closer to the customer. For example some companies use outsourcing companies to handle their customer service department, since it is such an important portion of their business.

Advantages of Outsourcing

Even though the benefits of outsourcing are many, each project should be dealt with on an individual basis. There are many ongoing operational costs that can be avoided if you outsource and that should be taken into consideration, however it should be noted that any organization that outsources the work can reduce costs and be more flexible, more effective and more efficient.

Some advantages of outsourcing are:

Transfer of knowledge to permanent staff

Projects reach market faster

Experienced, creative and flexible problem solvers

Predictable and cost-effective means

Flexibility in staffing requirements

Access to more professionals

Focus is on competency

Disadvantages of Outsourcing

The negative side of outsourcing cannot truly be universally applied to all industries of all types. However, a few common situations that we can come across are:

Jobs may be lost

Employees will find themselves with handling new tasks

Staff may have to be relocated

Workload amount may vary before and after outsourcing

Change of employer may take place for the employee

Employees may have to relinquish some of their responsibilities

The problems and dangers with these is that some former or long time employees may not take to this new trend easily. Facing disgruntled employees is something you need to prepare for if you are considering outsourcing a very important function in your organization.

It does seem however that, outsourcing is more advantageous than not especially for companies that want to cut down on employee size and be more financially efficient and are willing to take the outcome of the exercise in their stride.