Before getting into the advantages & disadvantages of Outsourcing, first let us look into & understand what is outsourcing & why organizations outsource.

Outsourcing is a practice of transferring or contracting non-core activities (like project or business process, in full or in parts) to third party vendors or to their subsidiaries or captive offshore centers for some specific objective mostly cost benefits.  There are several types of outsourcing viz. onshore, near shore, offshore outsourcing. In the recent times few new models of outsourcing have emerged like co-sourcing, multi-sourcing, crowd-sourcing. One of my favorite is global sourcing – which means using combinations of different models like onshore and offshore and more to achieve the specific objective.

The reasons to outsource may differ from company to company but most common reason is cost benefit.  Other reasons include time saving, quick turnaround, minimizing capital investments, tax benefits, mitigating labor & union challenges, workaround for corporate/HR/ hiring policies, continuous work or development (24/7).

Outsourcing is not a recent phenomenon; it has been in existence for a long time; in fact you can find its roots in the Industrial Revolution era. The offshore outsourcing in a large scale started in the mid 20th century in the manufacturing sector when lot of electronic manufacturing was outsourced to china. IT offshore outsourcing is comparatively a recent trend, where India has taken a leading role. Why India & what are the socioeconomic impact of this offshore outsourcing on  India as well as on outsourcing country & who actually is true beneficiary, is an interesting topic to discuss later. With the latest technological collaborative tools and with the onset of pervasive Internet/cloud computing the offshore outsourcing is going to the next avatar  where the physical location  of developer is irrelevant.  This seems like a good topic for my next blog article.

For now, let us look at the Pros & Cons of  Outsourcing, here they are:

Pros of Outsourcing

  •  Time savings
  • Cost savings
  • Access to resources ( which are unavailable or difficult to find)
  • Better/consistent  Quality – using stringent SLAs
  • Risk mitigation
  • Focus on the core business
  • Increase competitiveness with faster, better & cheaper product/service
  •  24x7 Continuous work possible
  • Adoption to new technology
  • Innovation

Cons of outsourcing

  •  Language challenges
  • Cultural challenges
  • Lack of control
  • Finding the right service provider
  • Low quality – as the adage goes” you get what you pay for”
  •  IP/Data integrity
  • Lower than expected  results – because of lot of hidden costs
  • Fixing and legal cost if things go wrong


Outsourcing has become indispensable in spite of several  Geopolitical & socioeconomical  criticism and challenges.  Outsourcing is here to stay because the benefits of outsourcing outweigh the drawbacks.  To sum it up, outsourcing can increase productivity at a lower cost which can provide the required boost  to many ailing companies for their rapid recovery. 


09/08/2014 20:41

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