Outsourcing

Outsourcing

Outsourcing

Outsourcing is the process in which one company contracts work that could be done in house to another company. Corporations view outsourcing as beneficial because it enables them freedom to focus on their core competencies. Although there are a great number of benefits to outsourcing, it also has its drawbacks. This paper will identify the advantages of outsourcing, discuss many issues a company might face when outsourcing, tie information studied and class activities into these issues, provide workplace scenarios where outsourcing will affect the outcome of a business.

Advantages

There are many advantages to outsourcing. Most of these are tied closely to overhead cost reductions, such as, training, recruitment, set up, and maintenance. For some companies, outsourcing has become a dominant source of income. Forty-five percent of IBM’s total sales, for example, are derived from outsourcing contracts they have taken on (Hechinger, 2003). This venture with IBM has allowed Visteon to “avoid making huge investments for information technology that they may not need in the future” (Hechinger, 2003, paragraph 6). Another advantage to outsourcing is it provides the company with personnel who specialize in the outsourced project. This leads to unbiased perspectives which can lead to new ideas and prove to be a very valuable venture for the company. Outsourcing also allows a company to only pay for what they need, and prevent people from not having enough to do or having too much to do. This also allows smaller companies to expand their capabilities and increase their competitiveness against larger firms.

Issues

Outsourcing can be very advantageous, but also very risky. Many times outsourcing contracts fail because organizations do not know how to determine which business segments should be outsourced. According to Mclvor (2011, paragraph 3), “many organizations sill fail to capitalize on the opportunities offered by outsourcing. Many...