Disadvantages of outsourcing

Outsourcing is the act of contracting your part of work for a lower price to another vendor. This is usually done to cut on costs and improve revenues. Most companies outsource their work to third-world economies where labor is cheap and resources are abundant. It is often done by the bigger companies by transferring their workload to free-lancers and demanding a higher price for the project because of their developed image. However the word outsourcing can have different meaning for different people. If an area lost jobs because the company outsourced its project to some low-paid economy then these people will have a bad view for outsourcing. And the people who received jobs because of this act will always consider outsourcing a positive term.

For a company outsourcing is a way risky step to take. In a way because there is always a possibility of losing managerial control over the outsourced department or project. Despite of the signed contract the managerial actions and decisions will still be performed by an outsider and it is a huge risk. The contract is always prepared by the other company so you are at disadvantage here as well. Any additional work that may come up during the project and is not mentioned in the contract will cost you additional charges. It will not be your own department who works for the company but will be an outsourcing company who are interested in their money. Not only that, but the biggest issue is business confidentiality. As you will have to give the private information to the new company or freelancer you have hired. This information can be very secretive and may be misused by the other end. It gets difficult when you are dealing with the other party for the first time. To be on the safe side it is advisable to include as much details in the contract as you can in case anything goes wrong you have your securities written and signed. The worst part in dealing with such companies is that they are not concerned with your corporate image; their only motivation is the profit they will earn. For this very reason they will try their best to increase the profit as much as they can by cutting down on expenses. This means they might hire cheap resources or use low quality material in manufacturing your product or finishing your task.

Outsourcing may save a company some cash but the risk is far higher. It may result in complete loss of goodwill and ruin the company image forever.

 

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