Outsourcing Pros and Cons



Table of Contents

Outsourcing Pros and Cons3

The History of Outsourcing3

Introduction3

Advantages and Disadvantages of Outsourcing4

Pros of Outsourcing4

Cons of Outsourcing4

Discussion5

The home court advantage5

Outsourcing won't overcome bad management6

A threat to staff morale6

On the plus side7

Before you sign7

Advantages of Outsourcing for Business10

Cost Savings10

Quality services10

Access to specialized skills11

Contractual Obligation11

Staffing issues11

Risk Mitigation11

Capacity Management12

Disadvantages of Outsourcing for Business12

Linguistic barriers12

Social Responsibility12

Company knowledge12

Staff Turnover13

Analysis of Factors13

Linguistic barriers13

Social Responsibility13

Company Knowledge14

Staff Turnover14

Outsourcing in America14

Dell Exports U.S. Service Jobs19

Wal-Mart Sows its Seed Worldwide20

Wal-Mart's Impact on Other Companies20

Wal-Mart's Destruction of Local Economy21

Conclusion21

References23

Outsourcing Pros and Cons

The History of Outsourcing

In the early 1960s and 70s, a few American textile companies began sub-contracting the production of textiles and garments to Asia. This was followed by the outsourcing of the production of shoes, toys, electronic items and auto parts. In fact, major auto producers started setting up assembly plants in foreign countries. (Nohria 2005) In the late 1990s, American companies began outsourcing services to countries like India. Jobs, that did not require a great deal of skill, were outsourced to countries with a huge English speaking workforce. Banks and insurance companies off-shored most of their back-office work. Outsourcing software development work also caught on in a big way. Accounting and law firms also started using firms, located overseas, for expediting routine work. (Cowen 2006)

Introduction

In lay man's term, Outsourcing can be defined as a process in which a company delegates some of its in-house operations/processes to a third party. Although this definition outsourcing is not complete in the full sense and seems very much close to contracting. But it is to be noted that contracting and outsourcing are in no way related. (Dervarics 2007)

To get a full fledged definition of outsourcing one has to take into consideration the matter of ownership or control. In contracting generally the ownership or control of the operation/process being contracted lies with the parent company, whereas in outsourcing the control of the process is with the third party and not with the parent company. you can also find many online jobs in this outsourcing. (Koppich 2008)

So now considering the above facts, outsourcing can be defined as a phenomena in which a company/organization delegates a part of its in-house operations to a third party with the third party gaining full control over that operation/process. Outsourcing has many advantages but at the same time it has some disadvantages that cannot be ignored. So let us look at some outsourcing pros and cons. (Levine 2009)

Advantages and Disadvantages of Outsourcing

Pros of Outsourcing

Global outsourcing gives employment opportunities in developing countries like India, China, Philippines, Mexico, Brazil etc.

Offshore outsourcing helps increase the standard of living in third world countries

Companies in developed nations can cut huge costs and concentrate on their core businesses by outsourcing their back office jobs

Outsourcing helps the companies in developed nations to provide better customer satisfaction

Customers in developed nations can get cheaper and newer products with better service

Outsourcing can help people produce newer and better jobs in the long run (Ambrosio 2007)

Cons of Outsourcing

As services get outsourced to off shore destinations, there are large ...