What are the pros and cons of outsourcing?

Outsourcing is often undertaken to provide enterprises a competitive advantage by delegating business process to external agencies and realizing the benefits of low labor, better quality and improved innovation. While this provides a good picture of the fair side of the coin, most organizations need to face the possible shortcoming of the process and the corresponding impact on the company’s core processes. To best analyze the opportunities presented it is essential to reflect upon the advantages and the disadvantages of outsourcing.

The pros of outsourcing
The pros of outsourcing often positively reflected by enterprises across industries include:

  • Better revenue realization and enhanced returns on investment
  • Lower labor cost and increased realization of economics of scale
  • Tapping in to a knowledge base for better innovation
  • Frees management time, enabling companies to focus on core competencies while not being concerned about outsourced routine activities
  • Increases speed and the quality of delivery of outsourced activities
  • Reduces cash outflow and optimizes resource utilization

The cons of outsourcing
Often weighed with the advantages before any decision on outsourcing is undertaken, the following represents some of the possible disadvantages often dwelled upon:

  • Possible loss of control over a company’s business processes while outsourced
  • Problems related to turnaround time
  • Lower than expected realization of benefits and results

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