The Pros And Cons Of Outsourcing
Outsourcing in simple terms is sub letting a part of your work to another company which has an expertise in that field and paying them for the work done. Outsourcing is primarily done for two reasons. First and foremost for saving costs and secondly because sometimes a talent or service is not available in-house so companies go in for outsourcing it from another firm. Like security outsourcing or call center services or helpdesk management services.
Outsourcing may or may not be offshored. However, right now almost 70% of the world’s outsourcing work is being off shored to Indian firms especially in the IT and IT enabled services sector. Outsourcing has many advantages but at the same time it has some disadvantages that cannot be ignored.
Pros of Outsourcing
The Outsourcing advantage lies in the fact that it helps companies cut costs and stay ahead in the competition.
Outsourcing helps US, UK companies and multinationals to get high quality products and services at a much cheaper rate with better customer services because these countries have higher wage rates.
Outsourcing of business back processes or even inbound and outbound calls to India greatly reduces the cost because employing an Indian is a whole lot cheaper than employing any one in U.K or U.S for the same kind of work and timings.
In the west, technical talent costs you a lot but in India, professional talent comes cheap. With the jostle for jobs amidst this high population ratio; firms can get the best that money can get!
With India’s wide pool of highly-skilled professionals, educated unemployed young work force and low costs of infrastructure, outsourcing the job saves 8 times the money that would have been spent on that process in US.
It makes business sense because:
- Companies cut their operating costs by half through outsourcing.
- Get access to more efficient and skilled labor.
- Saves on training cost of employees.
- Allows access to better technologies at a much lower rate
- Outsourcing increases productivity.
- Outsourcing allows the firm to concentrate on its core competencies
Downside of Outsourcing
A downside of outsourcing is that a break in infrastructure due to internet failure or any other technical glitch can cost the company dearly and create delays and losses.
In case, the Outsourcing firm goes bankrupt, or has a breakdown in management or bungling of funds (like in the Satyam Case) then the customers are left high and dry!
Outsourcing may lead to the company losing control over its process and the in-house staff being unable to handle it in case of an emergency.
Sometimes the outsourcing firm is handling sensitive data and the security measures are not so stringent, then it could lead to information breach which could be crucial in banking and financial outsourcing.
At times the current employees in the company may feel threatened due to outsourcing and may not allow it to happen.
But the benefits of outsourcing far outweigh the cons and if companies adopt a planned approach to outsourcing then it can give a great boost up in the profit sheets of any organization.