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Effects of Outsourcing - Essay Example

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Effects of Outsourcing

(Hira, 2005)
The process of outsourcing is continuous and does not have to be an all or nothing deal. It can occur in phases depending on current trends in the industry. The following are a list of the three main types of outsourcing:
Partial Outsourcing- This is when certain activities are kept in house such as customer service while other more specialized activities are sourced out. Plants and telecom offices would typically engage in this type of outsourcing.
No Outsourcing- The operations performed day to day are highly unique to an individual business and vital to marketing believability. An example would be a college or university. (Outsourcingsurvival, 2007)
While outsourcing operations has its benefits, there are reasons why a business should carefully examine the disadvantages it may present. One is the loss of managerial authority. It is much easier to manage employees in house than it is to manage an outsourced service provider. Outsourcing does not eliminate management responsibilities; it simply changes the nature and level of responsibility. It is also possible to lose sight of day-to-day operations while focusing on coordinating contracts with an outsourced company. Add to that the legal fees that will be incurred for putting together these contracts. The main reason to outsource is to reduce overall costs and any hidden fees may affect a business' bottom line.
Another disadvantage that should be taken into consideration are security and confidentiality concerns as they pertain to payroll, salary information, etcGenerally, the amount of money each employee earns is not widespread knowledge. If employee salaries are leaked that could cause some discord within the workplace. When a company insists on outsourcing the process of payroll, they must be very discriminating in their choice of providers. It must be handled only by people who are trustworthy in handling such privileged information. (Softwareprojects, 2007)
When operations are handed over to an external party the likelihood of decreased employee morale becomes a greater possibility. Employee talent that has been generated within a business will tend to get discouraged if they are ignored in favor of someone outside of the company. Someone who has worked for a company for a long time can understand certain business issues and will be better equipped to handle them more so than an outsourced party. If they are not called upon to handle business matters that may arise, their growth is stunted and they may feel as if they are not an important entity. Their quality of work may suffer because of this notion or because they rebel against the organization. Either way, this could result in the loss of quality employees which could in turn end up costing the business more financially. (Brown, 2005)
The sum total of all of the disadvantages listed above basically boils down to sheer loyalty to the organization. If operations are outsourced to an external group, their devotion is only to those who sign their paycheck. There simply is no familial environment culminated through years of work with a company. This is a very important factor as trust issues are involved and outsourcers must be ...Show more


The use of outsourcing has become commonplace in today's business arena. The basic definition of outsourcing is transferring of service and/or production to an internal or external company. The most popular reason to do this lies in the interest of reducing capital expenditure over a business proceeding…
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Effects of Outsourcing essay example
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