The financial pro's and con's of outsourcing - how to judge wether an Essay

The financial pro's and con's of outsourcing - how to judge wether an activity should be outsourced - Essay Example Beneifer Irani states that outsourcing offers freedom to pass on non – core, yet important sectors of its administration on companies that specializ in those very individual aspects. (Beneifer Irani)2 The advantage of outsourcing lies in the fact that it helps companies to cut costs and stay ahead in the competition. Indeed Companies can save up on operational costs to half by outsourcing. They get access to cheaper and more efficient labour and save up on training costs. They can also access better technologies at lower cost. Outsourcing also helps to increase productivity as they pay to a third party purely on output. It allows the company to concentrate on its core competency. Companies today want to make use of the outsourcing advantage in order to progress and stay abreast of the competition. The main disadvantage of outsourcing is that the company can get into serious trouble if the service provider is unable to provide the business or service due to bankruptcy, lack of funds, labour troubles etc. There is also a loss of control over the process that is outsourced and there may be a loss of quality. Unless the outsourced service is exclusively provided to one company, there is chance of the service provider failing one or the other principal and this can cause disruption in smooth flow of work. Outsourcing jobs to offshore destinations, is causing some unemployment as both high and low-end jobs are moving out. There is often a conflict between companies, national economies and individuals and it is difficult to reconcile all the stakeholders. The company must consider outsourcing on the level of its core requirements. If an activity is considered a core activity then it should not outsource it to a third party as it is not likely to be handled by better people than the company has. The very fact that it is a core competency declares that the company is most competent to perform it. However core competency has separate meaning for