Advantages and Disadvantages of Outsourcing

Outsourcing is a key trend in business. It offers some significant benefits for companies. One of the benefits is that of getting the work done by a specialized firm, which not only decreases the operational costs for the parent firm but also improves the quality of the outsourced processes. Companies also contract out whole departmental processes like accounting processes or HR processes. Outsourcing of HR functions is a feasible option for the startup firms because, in some cases, entrepreneurs may not have the skilled required for managing human resources at the start of the business because of lack of experience. Lack of professional experience and the need to develop business functions’ accuracy are the key issues that result in outsourcing of HR functions by entrepreneurs (Gray, 2013). Moreover, the huge wage gap between developing and industrialized economies also leads to outsourcing of business processes to developing countries in order to reduce the labor costs, which results in reduced operating expenses (Engardio, n.d.). Some additional benefits of outsourcing for businesses also include freed up resources that can be used in core processes, lowered operating costs, increased diversity of skills and resources, less worries about outsourced processes, and accelerated reengineering benefits. 

On the other hand, outsourcing also has some drawbacks. For example, some of the main negative aspects of outsourcing include increased dependency on third-party firms that may result in increasing the costs of getting the work done in the long run, decreased control over outsourced business processes, increased risk of information leakage, and reduced organizational learning. To sum it up, outsourcing has both benefits and disadvantages. Thus, companies need to adopt a careful approach while panning to outsource any of the business process because what appears to be good in the short-run may turn out to be problematic in the long-run.