Pros and Cons of Outsourcing

Despite resistance from political and labor lobbies, the offshoring juggernaut rolls on. During 2005 it became evident that the long-term trend towards outsourcing and offshoring is more robust than many thought. (Jethmalani 2006) Wholly different from external threats, there is the growing problem of internal failure. Of late, a significant risk is being associated with the basic outsource decision process. These perceived risks are the natural outcomes of failed projects with greater costs and poor quality than expected.

Owing to the constantly increasing loads of work, and increasing number of players, quality is being compromised in the outsourcing industry. The high expectations of quality that may have prevailed 5 to 6 years ago are no more that high. The high expectations associated with outsourcing seem to be hard to meet sometimes. The optimism of firms that intend to begin, or continue or increase using outsourcing has been affected in the process. Some firms are even contemplating to eliminate their use of outsourcing altogether, or at least decrease it considerably (Brown, Wilson 2005).

Such negative developments point to possible downward trend in the use of the outsourcing. While there is great growth in the outsourcing industry presently, its future growth may be inhibited to an extent. While there is success for some client firms, there is perhaps an equal number of  disappointments, partial or total failures. In such conflicting situations, the only certainty is change. The hope is that the work standards of more and more outsourcing providers would stay on par, even as the global outsourcing industry keeps on expanding.

As the industry of outsourcing evolves to meet the needs of client firms, so do the client firm's organisations to utilise outsource provider services. In the ideal circumstances, which are nonetheless not too difficult to achieve, firms on both sides of the outsourcing process should develop a symbiosis and grow steadily. The trouble with outsourcing is that it has become fashionable — and when something becomes fashionable there is always a rush to buy.

While there are real business benefits to be had from outsourcing, experience shows that winning them requires much careful thinking before you sign a deal and a lot of robust management afterwards. (White, James 1996) The benefits of outsourcing are mixed and depend heavily on the strategy of the firm. More outsourcing is not necessarily good or bad. There are some significant cost-reduction benefits to outsourcing, which suit firms with low-cost strategies.

The primary focus of the organisation and the capacity in which it wishes to compete in the market is the primary focus here. For example, firms that see information technology as a core competence, are better served by less IT outsourcing. These firms will still outsource, but only in more peripheral areas such as telecommunications network services, large-scale processing, or desktop maintenance. Let us consider the banking sector, for instance: the lines between the business of banking and IT are becoming blurred each passing year.

IT expertise is more and more needed within the organisation, as an integral part of it. In such circumstances, IT outsourcing may not be advisable. Therefore decisions about the extent of IT outsourcing are dependent upon the nature of the information technology capabilities required. Once the capabilities of the information technology portfolio have been determined, then it can decided how and to what extent they can be outsourced. It is more or less the same with other areas of outsourcing, except the peripheral ones (Sood, Robin.

2005). We shall now list the pros and cons of outsourcing, strictly from a company perspective. In the next section, we shall briefly consider the broader implications of outsourcing for the national and global economy. Outsourcing pros: 1) The organisation is relieved of the responsibility for management of those IT or administrative functions that are taken over by the outsourcing vendor 2) The outsourcing arrangement should reduce expenses for the organisation, at least after a certain period of time.

3) The outsourcing arrangement allows the organisations to concentrate on the most critical issues in the organisation. The sections/sectors requiring less high-level expertise (e. g. technical support) can be relegated to the outsourcing vendor, allowing the in-house staff to focus on the primary concerns of the organisation. 4) The outsourcing arrangement provides an opportunity to reduce the headcount of several departments in an organization (White, Barry 1996).