Question

Outsourcing can appear too good to be true, and some of the benefits of outsourcing can be outweighed by its long-term costs. Conduct some research on the advantages and disadvantages of outsourcing. Using what you learned from your research, discuss an example of how the benefits of outsourcing are outweighed by its long-term costs.

Answer 1

We conducted an extensive primary and secondary research and came up with the following advantages and disadvantages of outsourcing:

Advantages:

• Reduce short term costs
• Increases the efficiency of the existing workforce.
• More focus on core competencies of the organization.
• Lesser management people are required and only 2-3% of the SPOCs form the company are required and rest of the employees can be utilized to capitalize the strength of the company.

Disadvantages:

• Higher long term costs.
• Dependency increases on various outsourced companies.
• Lesser control over the communication that is done with the external customers.
• Risk of underperforming and not achieving the targets increases on the long term.

Example: A company provides insurance services but has outsourced its call center services to an external organization, but the call center services has deteriorated and the more investment in terms of budget and resources are being spent on improving the quality and restructuring and hence in the short term these issues were not witnessed but now in the long term its I quite visible that extra costs are being incurred because of outsourcing.