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

their mission.

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.

English: The logo of Compensation Solutions, a Hum...

Outsourcing-offshoring-resized

Logo of the European Outsourcing Association

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

with an...