Question

Identify 2 advantages and 2 disadvantages of outsourcing.

Answer 1

Outsourcing is the process by which business process are contracted to another party. Outsourcing includes domestic and foreign contracting. Outsourcing is of two types. They are:-

• Back office outsourcing - this include internal business function and organization services.. Example- billing.
• Front office outsourcing - this include customer service and deals with customer interaction.. Example- marketing.

The main advantages of outsourcing include:-

• It helps in cost saving and time saving by outsourcing the business activity to the third party. In order to perform particular activity, organization needs to recruit, train, develop employees with specific skills which require both money and time. Outsourcing this activity to third party will help the organization to save money and time and to utilize the same on core business. Example - company outsourcing the telemarketing to third party who are expert in this field.
• It helps in improving the speed and efficiencies of the business process that is outsourced. The third party perform that particular task that has been outsourced by the organization as they have the skills that is required to fulfill that specific business activity. Since they are expert in this field, it will help in improving the the speed and efficiency of the process. Example - helpdesk service are being outsourced to provide fast and quality service to the customers.

The disadvantages of outsourcing include:-

• Outsourcing may result in the loss of privacy and confidentiality of sensitive data. It is very important to keep a control and monitoring system in place to prevent data loss.
• The control in the operational activities that has been outsourced will be lost and the management will not be able to control those activities.