Outsourcing Pros and Cons: Is It a Worthy Alternative?

Outsourcing has many advantages.  Most companies today, in one way or another, have outsourced their business processes to third party contractors.  The degree of business process outsourcing may depend on the need and financial capabilities of companies.  Some companies may have outsourcing projects that could include whole sections or segments of their corporations.  While other companies, especially the medium-sized ones, are outsourcing some parts or a small segment of their business operation.

Although outsourcing the business process has many pros and advantages, it all boils down to two major elements.  First, outsourcing projects significantly reduces corporate expenses by cutting back on costs of business operations and process.  It would be more cost efficient for companies to sub-contract some of their operations and back office support than to maintain it in-house.  This is especially true for redundant business operations such as customer support and services, human resources, accounting, and business documentations.

Another advantage of outsourcing is the increased technical capabilities of companies.  Some companies have been outsourcing their business applications and IT services needs in order to enhance the technological competencies of their processes and operations.  Companies find it more convenient to deploy their information technology infrastructure through third party service providers.  These service providers have far better technology and support services for technology architectures.  So it would be technologically sound for companies to outsource these services than to build their own technology infrastructure. 

These outsourcing pros have contributed significantly in improving corporate financials and capabilities.  It is not surprising therefore to see more and more companies resort to business process outsourcing.

There is a growing trend for companies throughout the world to outsource some of their business segments and back office operations.  In fact, business process outsourcing has become one of the most vibrant global industries with expected annual revenues of $20 billion USD.  This fact is brought about by the growing sophistication and increasing flexibility of outsourcing companies to provide services to any types of companies.

It would be best however for companies to weigh the pros and cons of outsourcing before trying this business alternative.  In this way, companies could really determine if outsourcing would bring benefits to their operations.

The number one benefit of outsourcing business processes is its cost saving effect for companies.  Detaching a business segment or part of the company s operation and sub-contracting it to third party companies would reduce operational costs.  It also reduces the expenses in maintaining several layers of technical staff and large workforce.  Through outsourcing, companies can also allocate valuable resources to other business endeavors and they could focus more on the most important functions of their operation.

On the other hand, companies need to understand that offloading some of their business processes entail risks.  It should be noted that most outsourcing companies today are relatively new.  There is a risk of diminishing quality service deliveries if companies will be complacent about its outsourcing projects.  Some companies may also experience difficulty in the reduced operational flexibility whenever an innovation has come out.  Our sourcing companies may need time to adjust to the innovations thus a company might lose valuable market lead time.

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