Pragmatic Outsourcing

The Pros and Cons of Outsourcing

When we are facing a dilemma of whether to outsource some task, a project, a business process, or a role within organization one of the first questions that comes to mind is what are the pros and cons of outsourcing. And whether we reach for Google, institutional knowledge, or industry research the chances we’ll find conflicting answers. As it goes with other aspects of life, something that is a disadvantage for one organization could be an advantage for another, one man’s junk is another man’s treasure. What one organization consider an advantage another perceives as disadvantage, what one analysts sees as a benefit another labels as risk.

There are very few areas where majority of the sources agree, such as “savings”, yet even those appear to be surrounded with a lot of caveats, sometimes too many to take the point seriously. More so, chances are when you create your own definitive list and look at it just a few weeks later the priorities start to shift, obvious pros become not so obvious, and some cons suddenly seem less disturbing. That is not at all surprising as advantages and disadvantages of outsourcing are tightly related to situation and the task at hand.

There are many posts in this blog that cover this rather controversial topic in decent level of details such as Top 10 Reasons NOT to Outsource or Top reasons for outsourcing, and you also can find much more by using the cloud tag – just pick Offshore Cons or Offshore Pros.  Plus I thought it would helpful to have a brief list to work with, something you can use as a reference, so here you go:

The Pros or Potential Benefits / Advantages / Rewards of Outsourcing

• Cost reduction
• Reduction in time to market
• Improvements resource utilization
• Increase in organizational flexibility
• Ability to offload miscellaneous functions / concentrate on core competency
• Improved financial metrics such as reduction in capital expenses
• Access to diverse talent pool
• Crosspollination and benefits of established operations

The Cons or Potential Risks / Disadvantages / Pitfalls of Outsourcing

• Social responsibility and ethical issues
• External risks
• Geopolitical Instability
• Security, privacy, and intellectual property loss
• Inadequate vendor capabilities
• Internal risk
• Failure to create joint venture
• Loss or reduction in control
• Backfiring unrealistic expectations
• Lack of organizational preparedness
• Outsourcing management overhead
• Negative staff impact
• Staff turnover
• Knowledge loss
• Loss of team spirit
• Personal impact on career, lifestyle and reputation