Outsourcing and its Effects on Business.

Essay by bkobraCollege, Undergraduate February 2006

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The subject of this paper is to determine whether outsourcing should be used as an effective tool in business. Outsourcing is known as the practice of turning over responsibility of some or all of organizations information systems to a foreign firm in order to stay competitive. Outsourcing is not new to the business world, as it dominated the manufacturing sector the past couple of decades. By the 1990's, there has been a major shift from outsourcing blue collar jobs to white collar jobs. Popular destinations for include India and China where mostly white collar jobs such as call center agents, data entry, processing forms etc are outsourced. Companies nowadays are look even more to outsource high-end jobs from the IT sector. There are various advantages and disadvantages. Advantages include lower costs, better quality, downsizing to focus on the core competencies, highly motivated workforce, and Information System performance problems.

Disadvantages include loss of jobs and its effects, hidden costs that are often not calculated, security and confidentiality issues, cultural barriers, and lack of control over the supplier. Outsourcing is mainly used to save on costs; however there has been a lot of backlash against companies in the developed world because of the lack of jobs in the IT sector. Companies need to effectively research for to be successful in an outsourcing relationship because outsourcing failures are very costly and are difficult to reverse. Outsourcing is a now a popular strategy for many organizations as the worldwide market for computing services are projected to grow yearly. In the future, new outsourcing destinations such as Eastern Europe are expected to pop up. It is essential to carefully weigh both the advantages and disadvantages before heading into a outsourcing relationship with another party.


With the increasing need to remain competitive,