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Disadvantages of Outsourcing

         
Introduction

Outsourcing has generated much controversy in recent times for various reasons. Outsourcing has been resorted to with mainly for maximizing profits. Before deciding on outsourcing, the outsourcer should examine in detail the various problems that are likely to crop up. Some of the problems can be easily straightened, while others can result in the outsourcer finding itself in a no-way out situation.

Criticism at home for offshore outsourcing: 

A heated debate has been raging in Europe and America over the issue of offshore outsourcing. The argument of the critics is that it is causing unemployment. Jobs are being outsourced to countries like India, which would otherwise be done by employees within the shores. This is being looked upon as grave threat to the economies of U.K and U.S. 

Chance to nurture in-house talent is lost: 

The employees of the outsourcer are deprived of an opportunity to develop skills and experiences with respect to the task that is being outsourced. 

Loss of Managerial Controls: 

The service provider is a separately managed entity .The contract between the service provider and the client may overlook certain factors, which could result in a total mismatch of policies of both parties. It may be much easier for the client to get the job done by its own employees rather than someone else over whom he has no control. 

Hidden costs: 

The very idea of outsourcing is that it would help enhance the profit margin of the client company. However, very little attention is paid to the costs involved while engaging a vendor. 

  1. Often a client seeks the services of a consultant (who has to be paid a handsome amount in return) to help hire a vendor. If, on the other hand, the company takes it upon itself to hire a vendor it would mean waste of precious time and labor. 
  2. Contracts have to drawn between the vendor and outsourcer, and old ones may have to be renewed from time to time. Coordination between the two sides has to very high to avoid the legal costs cut into the profit. The expectations on both sides are often unrealistic. 
  3. The employees of the vendor company may require training to sharpen their skills and make them more competitive.

Threat to confidentiality and security: 

Some matters are by nature meant to be confidential. For example, vendors dealing with salaries, bank accounts and financial matters have to maintain high levels of confidentiality and secrecy. They are engaged in good faith. Any breach in the security and confidentiality can result in irreparable damage to the reputation of the service provider. Both the outsourcer and the vendor have to guard against frauds. Employees of vendors have to be screened properly for this reason. Outsourcers have to be clear whether they want to outsource a particular task at all considering the risk they may be putting themselves to. 

Inflexibility creeps in: 

Another great disadvantage that outsourcing can cause is that the outsourcing partner may turn out to be inflexible to changes in business environment. The focus on the consumer is lost as also the need for sharing the cost savings. 

Political and cultural problems: 

With offshore outsourcing, there is greater risk of the outsourcer being entwined in the politics of the vendor nation or of at least be affected by the political instability in the region. Thus, smooth functioning could be hindered. 

Cultural differences are also greater in case of off shore outsourcing. Misunderstandings can occur due to differences in language. 

It is clear from the above that Outsourcing has its risks and must be resorted to only if necessary. .

 
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