Effects of Outsourcing
The use of outsourcing has become commonplace in today's business arena. The
basic definition of outsourcing is transferring of service and/or production to an internal
or external company. The most popular reason to do this lies in the interest of reducing
capital expenditure over a business proceeding. This will downgrade the reliance on
internal resources and will give management more time to focus on their business' core
competencies. It can be a cost effective method of supplementing an organizations in
house capabilities, contributing additional expertise, while allowing them to focus on
The process of outsourcing is continuous and does not have to be an all or nothing
deal. It can occur in phases depending on current trends in the industry. The following
are a list of the three main types of outsourcing:
Total Outsourcing - All operations have been contracted to another provider. This is common in generic, non-strategic businesses like food or janitorial services.
Partial Outsourcing- This is when certain activities are kept in house such as customer service while other more specialized activities are sourced out. Plants and telecom offices would typically engage in this type of outsourcing.
No Outsourcing- The operations performed day to day are highly unique to an individual business and vital to marketing believability. An example would be a college or university.
While outsourcing operations has its benefits, there are reasons why a business
should carefully examine the disadvantages it may present. One is the loss of managerial
authority. It is much easier to manage employees in house than it is to manage an
outsourced service provider. Outsourcing does not eliminate management
responsibilities, it simply changes the nature and level of responsibility. It is also
possible to lose sight of day-to-day operations while focusing on coordinating contracts