advantages and disadvantages of outsourcing essay

21 Big Advantages and Disadvantages of Outsourcing

A business of any size can take advantage of the benefits of outsourcing because of how interconnected we are today through the Internet. The disadvantages of this practice can also make it so that a company ends up filing for bankruptcy prematurely due to the outcomes that were generated.

Whether you are in sales, marketing, or product development, there are a variety of unique benefits that are possible when you take the outsourcing approach. This relationship allows you to hand over specific tasks to someone outside of your organization without compromising the quality of the work being accomplished.

About 300,000 positions get outsourced every year in the United States, and the global market for this activity has a value that is approaching $100 billion. Almost 60% of companies use this practice as a way to reduce their expenses.

Although the government and defense sectors are the largest suppliers of opportunities in this area, it is still advantageous for anyone with a business to consider the advantages and disadvantages of outsourcing right now.

List of the Advantages of Outsourcing

1. Outsourcing provides you with an opportunity to gain immediate expertise. The most significant advantage that a business can gain by approaching the outsourcing process is an increase in expertise access. Your C-Suite and core team members are fantastic in their areas of education and experience, but it is impossible to be an expert at everything. Instead of trying to force a square peg into a round hole, outsourcing gives a business the opportunity to improve their overall performance by drawing on the specific skills of other experts in various industries.

Although outsourcing is often debated because of the number of jobs that get sent to foreign countries, companies can also look for freelancers at home who can provide this necessary expertise.

2. Projects can get completed faster through the outsourcing process. Small business owners often look to the processes of outsourcing as a way to complete work because the tasks can get finished sooner. When your company has a limited number of employees, then there are only so many hours in the day when your group of people can be productive. If you partner with other agencies or freelancers to complete these tasks, then a project can get done a lot faster.

You can take advantage of the time zone differences around the world to outsource time-consuming tasks to external agencies. It creates a scenario where your business can become productive around the clock.

3. Outsourcing allows your company to focus on what matters. An enhanced level of freedom becomes available when companies begin to work with external agencies or freelancers. When you pass along projects or tasks that consume a significant portion of your time, then you can return to your strengths and skills. That means your leadership team can work on enhancing internal core processes to ensure that your agency remains healthy over time.

4. Companies can share some risk factors through the outsourcing process. Risk assessment and analysis is an integral component of any project planning experience. If your company is going to tackle a project by itself, then all of the rest sits in your lap. The outsourcing process allows you to take specific campaigns or processes to industry experts in their respective fields. It is an advantage that allows you to benefit from those enhanced abilities to mitigate the potential problems that can develop while working.

Outsourcing does have a unique set of risks that must be managed through the contract, but it is possible to reduce problems in this area by taking a proactive look at all of the terms and conditions that govern these relationships.

5. You can save money when you can outsource specific tasks. Companies can save a significant amount of money when they outsource specific tasks to partner agencies or individual freelancers. Five specific areas of focus with this advantage can help to make these relationships start to pay off almost immediately.

• The average business spends over $1,200 to train each worker during their first days of employment. Outsourcing can reduce the cost by 50%.
• When you work with freelancers or outside agencies, then you don’t have to pay the cost of benefits in addition to the salary responsibilities.
• Employee opportunity costs are lower because you aren’t paying people to clean their desks, perform data entry, or complete other mundane tasks.
• Tech support functions can save a significant amount in labor costs.
• Telecommuting gives a business several ways to reduce overhead expenses without disrupting productivity.

6. Outsourcing allows an agency to stay productive 24/7. Companies that embrace the art of outsourcing can enhance their productivity levels immediately with these relationships. Multiple time zones from around the world make it possible for a business to stay productive all day, every day. Although this benefit requires strategic thinking and a little luck when finding the needed expertise in each location, the logistics of accomplishing this task is worth the work that it takes.

When you get this advantage of outsourcing right, then it effectively means that your business continues to operate even when you are asleep, taking a vacation, or running errands with your family.

7. It simplifies project management approaches. You can choose from a variety of specialist freelance websites or online services to begin the outsourcing process as a small business owner. You will find that several dynamic platforms offer intuitive approaches that can take your productivity levels to the next level. This benefit helps you to effectively manage what is being done, when it is due for review, and how it will get paid. Many of these processes can benefit from automation.

New algorithms that embrace concepts from artificial intelligence and machine learning can simplify this process even more by automatically matching specific tasks to providers. That means even more of your time gets freed up so that you can focus on other essential tasks.

8. You can start the process of simplifying work relationships. Have you ever heard someone say that it is never a good idea to work with family or friends? Although most small business teams involve family operations or are part of a tight-knit group of long-term friends and this can be a good thing, it can also lead to problems when the work isn’t being done up to a specific standard. When you outsource the tasks, then you can minimize whatever personal relationship issues develop in a professional environment because you are managing simple contracts.

This benefit doesn’t mean that you can remove all personal conflicts from the workplace. It does give you an opportunity to salvage relationships when a professional standard might not be present.

9. Outsourcing allows you to target specific processes or efforts. The process of outsourcing allows companies of any size to execute targeted campaigns or projects that they would otherwise be unable to manage. You can access expertise from any geographic location or industry background because of these processes. It is a benefit that gives your company the chance to explore new risks, target additional markets, or experiment with unique approaches.

It is almost impossible for a company to grow today without the desire to take on at least some level of risk. Although it is beneficial to stay in a comfort zone for a little while when profits are coming in, outsourcing creates a safety net where new ideas can get tried without putting everything at risk.

10. Your company can have higher peace of mind. Outsourcing can seem like a scary situation when you first approach this idea. If you choose a reliable freelancer or external agency with a reputation of success, then you can have the peace of mind in knowing that the tasks are being handled appropriately. Your company gets to take advantage of outside expertise while barely lifting a finger to accomplish specific tasks or goals.

Although you can always find bad actors and false reviews out there that can put some agencies in a bit of trouble, the same risk applies to the hiring process when you bring in new workers.

11. Outsourcing can apply to almost any leadership level in an organization. IT positions are usually the first ones to be considered for outsourcing because of the significant differences in salary expectations. An entry-level employee in the United States might earn $40,000 per year, while someone in China with more expertise earns about $7,000 annually. Companies can go to India to pay someone $8,400. Some Silicon Valley agencies are reportedly even offering temporary work visas as part of the payment package.

High-level leadership tends to be the most expensive area of salary expense that companies manage. You need to pay people to bring their experience to your agency. Outsourcing changes that dynamic because you can now take advantage of the global perspective when approaching the need for C-Suite assistance.

List of the Disadvantages of Outsourcing

1. Companies lose some control over their work processes with outsourcing. When a business decides that outsourcing is the correct approach to use for a project or a specific need, then there is some control lost over the processes involved. When you form a relationship with an external agency or a freelancer, then you don’t have as much control over how tasks are completed and monitored. That is why it is essential for a relationship to form because it is imperative for you to know and trust the company or people you’ve brought on through the outsourcing process.

2. Outsourcing always has hidden costs to consider. The practice of outsourcing is popular because it offers a way to complete specific tasks for a lower labor cost. What many businesses discover after getting into this relationship is that there could be several hidden costs that are unaccounted for during the initial setup phases of this relationship. You must read the terms and conditions of any contracts thoroughly before agreeing to anything. Outsourcing agencies typically ask freelancers and small business owners to sign lengthy agreements with a significant amount of fine print. If you aren’t reviewing those terms carefully, then unexpected costs could be coming your way.

3. Security risks exist in even the best outsourcing relationships. Businesses must always exercise caution when using customer-related data in this current era of information protection. If you plan to outsource processes or procedures that require the sharing of personal info, then you could be placing the privacy of others at risk in your effort to find a simpler solution. This disadvantage can also apply to the intellectual property that your company currently owns.

New laws are requiring businesses to take extraordinary measures to prevent data loss. When you create new pathways for information sharing, then there are more opportunities for hackers to get their hands on this critical asset.

4. Outsourcing can reduce quality control measures. It is not unusual to see outsourcing companies, and some freelancers, motivated more by their profit margin than an ability to complete projects to the best of their ability. This disadvantage is often seen when you receive work back quickly. It might meet your deadlines and get the basics right, but the project may also not conform to the standards or quality that your customers have come to expect when working with your brand.

Outsourcing requires you to trust the people you hired to complete these tasks. Make sure that your contract allows for a revision of the work you receive to add a layer of protection against this particular disadvantage.

5. You are sharing your financial wellbeing with another company. Outsourcing requires a company to trust the financial status of their partner when they begin this cooperative relationship. If the freelancer or agency goes out of business in the middle of a contract, then it can leave you in an uncomfortable position. Make sure that you spell out all of the terms and conditions in plain language regarding what an outcome will be if the outsourcing agency goes out of business in the middle of your project. You don’t want to be stuck in the position of taking a financial hit should they fail to deliver on their promises.

6. Outsourcing can be a PR nightmare for some agencies. When you take your work overseas through outsourcing, then it is possible for your company to receive a significant level of domestic backlash. Every job that gets completed through this process is an employment opportunity taken away from someone in the local community. This disadvantage means that you can run into adverse feelings regarding your decisions from your consumer base. Some people have taken a moral stance against outsourcing behaviors.

You will also find that criticism will come your way if your products or services are priced too high because you are using local labor. For better or for worse, there will always be criticism. It is up to you to determine what the right course of action is to take for your company.

7. You might have timing issues develop in an outsourcing relationship. When you outsource a specific task to an outsourcing agency or freelancer, then you need to create synchronicity with your timing expectations. Your partners could very well be marching to the beat of a different timing drum. Trying to get your schedules to match up so that customers can receive what was promised to them on a reliable timeline can sometimes feel like an impossible task to complete.

One of the reasons for this disadvantage is the timing differences that exist in different cultures around the world. The United States experiences this issue when a company from the East Coast hires a freelancer who lives on the West Coast. The three hours of difference between the two time zones can create a scheduling headache at the beginning or the ending of the working day.

8. Outsourcing can cause your company to start losing its focus. When a company begins to outsource multiple projects to varying agencies and freelancers, then the individuals involved in monitoring this work maybe putting in more hours to verify the quality of what they receive then if they did the work by themselves. Most outsourcing agencies tend to service multiple clients at the same time, which also means that your work may not always receive the focus that you believe it deserves. There are times when this lack of focus on both sides of the aisle can be extremely detrimental to the health of your business.

9. Things get lost in translation when you work with other people and agencies. Essential instructions often get lost in translation when you start communicating with remote workers and agencies by telephone or email. Even if you attempt to avoid this disadvantage by having an in-person meeting or a video conference call, people can interpret different words and phrases and unique and unexpected ways.

It is imperative for any company that pursues outsourcing to verify that every instruction given is heard or understood so that everyone is on the same page. When miscommunication happens, it can cost all parties a serious amount of money, time, and stress.

10. Outsourcing can create moral dilemmas for some agencies. The United States has one of the most valuable economies in the world today. That means the standard of living is quite high. When a company considers outsourcing to a firm in Asia, then this fact changes. Lower salary costs might support a living wage on the other side of the Pacific. Paying someone less than $2 per hour for something that you’d pay someone $20 per hour to complete at home can force some executives into a unique conundrum.

Then there is the reality of internal growth. When you begin to expand domestic operations, then you start to build new opportunities for your agency. Sending jobs to an outsourcing agency will help that firm grow more instead of your own.

Most industries use outsourcing to find the best talent possible for every project or circumstance. Although information technology and marketing tend to lead the way in this area, you will find numerous opportunities in payroll management, human resources, manufacturing, and government needs.

Some of the largest companies in the world, including Apple and Walmart, use outsourcing processes to improve the quality of their work and their overall efficiency levels. Small businesses use freelancers through websites like Fiverr for the same reasons.

When is it time to consider the advantages and disadvantages of outsourcing? For most agencies, it is when there is a need to cut labor expenses. Some executives feel that this approach helps them focus on their core business. It can also be a way to resolve capacity problems that develop. The bottom line is this: if you don’t have the talent or time to complete a specific task right now, then partnering with someone who can is a decision that makes a lot of sense.

More From Forbes

The pros and cons of outsourcing.

• Share to Facebook
• Share to Twitter
• Share to Linkedin

Shutterstock

Have you been mulling over the idea of outsourcing one or more tasks or employment opportunities? From product development to sales and marketing, there are a variety of benefits of taking this approach.

With outsourcing growth expected in the years to come, there may never be a better time to learn more about this topic. Before you move forward, it’s imperative to compare the pros and cons of outsourcing. And it's also very important to understand the effect outsourcing can have on company culture.

Advantages Of Outsourcing

Knowing the benefits of outsourcing will help you decide if this is something that could work for your business. Here are three reasons to give this a try:

1. You Don’t Have To Hire More Employees

When you outsource, you can pay your help as a contractor. This allows you to avoid bringing an employee into the company, which saves you money on everything from benefits to training.

2. Access To A Larger Talent Pool

When hiring an employee, you may only have access to a small, local talent pool. This often means you have to compromise. Many companies have found that outsourcing gives them access to talent in other parts of the world. If you need specialized help, it often makes sense to expand your search.

3. Lower Labor Cost

Did you know there are approximately 300,000 jobs outsourced by the United States each year?

Every company has its own reason for doing this, with many chasing lower labor costs. You don’t want to trade quality for price, but outsourcing often allows you to get the best of both worlds. By searching a global talent pool, it’s easier to find the right talent at the right price.

Cons Of Outsourcing

Despite the many benefits of outsourcing, you don’t want to go down this path until you compare these to the potential drawbacks:

1. Lack Of Control

Although you can provide direction in regard to what you need to accomplish, you give up some control when you outsource.

There are many reasons for this, including the fact that you are often hiring a contractor instead of an employee. And since the person is not working on-site, it can be difficult to maintain the level of control you desire.

2. Communication Issues

This doesn’t always come into play, but it’s one of the biggest potential drawbacks. Here are several questions to ask:

• What time zone does the person live in and how does this match up with your business hours?

• What is your preferred method of communication? Phone, email, instant messaging?

• Does the person have access to a reliable internet connection?

According to Cameron Herold , the founder of a COO training program, communication is essential to success in the business world. Since a large number of U.S.-based employees report not being engaged at work , communication remains a major problem. Will this get worse if you outsource?

3. Problems With Quality

Despite all the benefits of outsourcing, it is only a good thing if you’re receiving the quality you expect. Anything less than this will be a disappointment.

This isn’t to say you can’t successfully outsource particular tasks, but you need to discuss the expected quality upfront.

Impact On Company Culture

As a business owner, it’s easy to focus on the benefits of outsourcing, all without considering the impact it can have on your company as a whole. If you plan on outsourcing, you need to take steps to ensure that it doesn’t have a negative effect on company culture.

A positive work culture leads to a higher level of productivity, so you don’t want to do anything to jeopardize this. Some of the ways outsourcing can negatively affect company culture include:

• Upset employees as they may feel they are being replaced

• Confuse employees who don’t understand why you are outsourcing particular tasks

• Add challenges to the daily workflow of the company

Outsourcing doesn’t always have a negative impact on company culture, but you need to protect against this before you ever take a step in this direction. This typically means discussing your decision with any employees who could be impacted.

There are many pros and cons of outsourcing, all of which you should carefully consider before deciding for or against this strategy. With the ability to affect company culture, this isn’t something to take lightly. Do you have any experience with outsourcing? Did it benefit your company, or result in more harm than good?

• Editorial Standards
• Reprints & Permissions

Home — Essay Samples — Business — Outsourcing — Advantages and Disadvantages of Outsourcing for a Business

Advantages and Disadvantages of Outsourcing for a Business

• Categories: Company Outsourcing

About this sample

Words: 997 |

Published: Mar 1, 2019

Words: 997 | Pages: 2 | 5 min read

Table of contents

Introduction, advantages of outsourcing, disadvantages of outsourcing.

• Dibbern, J., Goles, T., Hirschheim, R., & Jayatilaka, B. (2004). Information systems outsourcing: A survey and analysis of the literature. The DATA BASE for Advances in Information Systems, 35(4), 6-102.
• Domberger, S., Fernandez, P., & Li, C. K. (1998). The impact of outsourcing and high-technology capital on business performance: A firm-level analysis. Journal of Economic Behavior & Organization, 35(3), 331-361.
• Lacity, M. C., & Willcocks, L. P. (2001). Global outsourcing of back office services: Lessons, trends, and enduring challenges. Strategic Outsourcing: An International Journal, 1(2), 191-201.
• Kakabadse, A., Kakabadse, N., & Kouzmin, A. (2003). From in-house to out-house: The dissemination of HR activities in the US. Journal of World Business, 38(2), 121-132.
• Raghuram, S., Garud, R., & Wiesenfeld, B. (2003). Capturing the complexity in advanced technology use: Adaptive structuration theory. Organization Science, 14(5), 542-555.
• Lee, J. N., Huynh, M. Q., & Kwok, R. C. (2002). The strategic value of IT outsourcing: An empirical investigation. Information & Management, 39(7), 625-635.
• Mann, A., & Borgaonkar, A. (2017). Outsourcing: A literature review. International Journal of Management and Commerce, 5(2), 19-31.

Cite this Essay

Let us write you an essay from scratch

• 450+ experts on 30 subjects ready to help
• Custom essay delivered in as few as 3 hours

Get high-quality help

Verified writer

• Expert in: Business

+ 120 experts online

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy . We’ll occasionally send you promo and account related email

No need to pay just yet!

Related Essays

7 pages / 3600 words

3 pages / 1700 words

1 pages / 325 words

4 pages / 2199 words

Remember! This is just a sample.

You can get your custom paper by one of our expert writers.

121 writers online

Still can’t find what you need?

Browse our vast selection of original essay samples, each expertly formatted and styled

Related Essays on Outsourcing

In today's globalized marketplace, companies are constantly seeking ways to enhance their competitiveness and operational efficiency. One such method is outsourcing, which involves delegating certain business functions to [...]

Outsourcing is a common practice in today's business environment, where companies delegate certain functions to specialized firms in order to cut costs and increase flexibility. However, this decision comes with its fair share [...]

Outsourcing has become a prevalent business strategy in today's global economy, with companies seeking to reduce costs, increase efficiency, and tap into specialized expertise. One key aspect of outsourcing that has gained [...]

Everyone wants to be the master of sales and know all the secrets of the formula for success on Fiverr. You know, having all the money, fame and popularity — and the positive reviews, especially the positive reviews — of a [...]

The business procedure outsourcing industry in India has developed significantly and as its size builds so does its upper hand. Contrasted and 1996 when this Industry had begun advances into the United States with Outbound [...]

In my dissertation, I plan to cover Globalisation, Outsourcing and the importance of Geographical Coverage for global firms and the many different factors that are considered when choosing to expand to a new location. On the [...]

Related Topics

By clicking “Send”, you agree to our Terms of service and Privacy statement . We will occasionally send you account related emails.

Where do you want us to send this sample?

By clicking “Continue”, you agree to our terms of service and privacy policy.

Be careful. This essay is not unique

This essay was donated by a student and is likely to have been used and submitted before

Download this Sample

Free samples may contain mistakes and not unique parts

Sorry, we could not paraphrase this essay. Our professional writers can rewrite it and get you a unique paper.

Please check your inbox.

We can write you a custom essay that will follow your exact instructions and meet the deadlines. Let's fix your grades together!

Get Your Personalized Essay in 3 Hours or Less!

We use cookies to personalyze your web-site experience. By continuing we’ll assume you board with our cookie policy .

• Instructions Followed To The Letter
• Deadlines Met At Every Stage
• Unique And Plagiarism Free

Essay Services

• Academic Writing Services

Essay Writing Service

• Assignment Writing Service
• Essay Plan Writing Service

Dissertation Services

• Dissertation Writing Service
• Dissertation Proposal Service
• Topic with Titles Service
• Literature Review Service

Report Services

• Report Writing Service
• Reflective Writing Service
• Case Study Writing Service

Marking Services

• Marking Service
• Samples Samples
• Reviews Reviews
• About UKEssays
• Our Guarantees
• Our Quality Procedures
• Contact UKEssays
• Write for UKEssays

The advantages and disadvantages of outsourcing

Disclaimer: This is an example of a student written essay. Click here for sample essays written by our professional writers. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.ae.

Advantages of outsourcing

Disadvantages of outsourcing, cite this work.

To export a reference to this article please select a referencing style below:

Give Yourself The Academic Edge Today

• On-time delivery or your money back
• A fully qualified writer in your subject
• In-depth proofreading by our Quality Control Team
• 100% confidentiality, the work is never re-sold or published
• Standard 7-day amendment period
• A paper written to the standard ordered
• A detailed plagiarism report
• A comprehensive quality report

Approximate costs for Undergraduate 2:2

7 day delivery

Delivered on-time or your money back

1845 reviews

Get Academic Help Today!

Encrypted with a 256-bit secure payment provider

• Plagiarism checker
• Sign Up Sign In

The advantages and disadvantages of outsourcing

Advantages of outsourcing, down sides of outsourcing, question a couple of.

Find Another Essay On Exploiting My Strengths and Strengthening My Weaknesses

It was the cry of outraged womanhood that has, frederick douglass primary analysis dissertation, phonological development in children composition, affordability analysis for evidence primarily based project capstone project, consumerism essay, business ethics tyco international article, media job essay, nazi germany essay, elizabeth barrett browning essay, cash bundren sample article.

Topic: Advantages disadvantages ,

Published: 04.10.20

• Review on the myEagle Portal
• Review on the My Pack Portal
• Review on the mySCC Portal
• About Walden Student Portal

Your Email (required)

Please leave this field empty.

Your Name (required)

Your Message

Outsourcing – Insourcing: Advantages and Disadvantages Report

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

Advantages of insourcing

Disadvantages of insourcing, advantages of outsourcing, disadvantages of outsourcing, recommendations.

To begin with, insourcing research is by the company employees who have a better understanding and knowledge of the company. They understand the company’s requirements and expectation therefore; conduct research in a way that satisfies the company’s goals and objectives. In addition, insourcing promotes high degrees of quality control in the company. Quality control refers to the maintaining of the standards of manufacturing products through product testing against the specifications provided. This process ensures that the product manufactured is consumable by clients at the price set by the company. Insourcing also promotes good relationships between decision makers and the researchers thus enabling the two parties to work towards a common goal, which is achieving the research agendas.

Insourcing tends to be cheaper to a company than outsourcing. Research costs are lower if a company has the business volume that is required to achieve an economy of scale. Hiring a researcher from outside the company proves to be expensive for most companies. Insourcing also allows the company management to oversee the whole research procedure. This way, they can contribute in the research from time to time and give advice in case of any difficulties the research team is facing. It also can oversee the use of funds allocated for the research and ensure that they no mismanagement of the funds.

High research costs can occur due to lack of resources and incompetence among researchers. The company researchers might have less focus that research professionals. These company researchers may also lack experience and expertise that research professionals have. Company politics might affect the outcome and integrity of the research. In addition, company researchers might have to perform multiple roles causing confusion to them. Lack of consistency in the research outcomes might inconvenience the company in terms of time they need to produce a certain product.

Using a different firm to carry out research is advantageous since they have experience hence perform the job efficiently than how insourcing would. Outside firms have access to diverse and professional researchers such as mathematicians, economists, statisticians and psychologists. Insourcing research would not have these kind of professionals. Outsourcing also encourages confidentiality of companies they work for since it is one of their policies. This therefore prevents stealing of ideas amongst production companies.

Using outsourced researchers makes it difficult for the company to manage the process. In this case, misappropriation of funds might occur making it more expensive for the company to complete the research. Outside firms might not understand the company’s objective and clients’ needs while carrying out research and making conclusions. There is no relations with the outsourcing firm hence, making it difficult for the company’s management to communicate with the firm.

To ensure that the company chooses the most efficient method of research, the company should compare the advantages of outsourcing and insourcing and settle on the on the most convenient for them. They should focus on the technology used in both scenarios, human resources available in the company, the company’s view on risk taking and the availability of participants for the insourcing research. For instance, does West Island Products have better technology than the outsourcing firm does?

This process of weighing options is useful since it enables the company to choose the most suitable method for the company. It gives the company confidence that the method of research they use is profitable.

Disadvantages

This evaluation process might prove to be expensive for the company since it requires expert opinions. In addition, the company might end up choosing an expensive research method yet, there is no guarantee that the method will be efficient and productive.

• Outsourcing Evolution in Poland
• Benefits/Advantages of Outsourcing and/or Off-Shore Outsourcing That Outweigh the Disadvantages
• Outsourcing and Its Effects
• Merger Bids by Kraft and Changes in Price on Key Dates
• Movement of Companies Within the European Union
• Requirement Provisions Impact on the Financial Markets
• Pros and Cons of Competition
• Investing in Turkey of the Oh la La! French Manufacturing Company
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2022, April 9). Outsourcing - Insourcing: Advantages and Disadvantages. https://ivypanda.com/essays/outsourcing-insourcing-advantages-and-disadvantages/

"Outsourcing - Insourcing: Advantages and Disadvantages." IvyPanda , 9 Apr. 2022, ivypanda.com/essays/outsourcing-insourcing-advantages-and-disadvantages/.

IvyPanda . (2022) 'Outsourcing - Insourcing: Advantages and Disadvantages'. 9 April.

IvyPanda . 2022. "Outsourcing - Insourcing: Advantages and Disadvantages." April 9, 2022. https://ivypanda.com/essays/outsourcing-insourcing-advantages-and-disadvantages/.

1. IvyPanda . "Outsourcing - Insourcing: Advantages and Disadvantages." April 9, 2022. https://ivypanda.com/essays/outsourcing-insourcing-advantages-and-disadvantages/.

Bibliography

IvyPanda . "Outsourcing - Insourcing: Advantages and Disadvantages." April 9, 2022. https://ivypanda.com/essays/outsourcing-insourcing-advantages-and-disadvantages/.

• Call to +1 844 889-9952

Advantages and Disadvantages of Human Resource Outsourcing

Introduction

Human resource, management, and outsourcing, reasons for human resource outsourcing, reasons against human resource outsourcing, activities to outsource, reference list.

Several companies and organizations in the world have resorted to outsourcing for Human resources. This has drawn great interest in its effect on the productivity of the various companies. Of significance however is the fact that more companies are shifting to outsourcing, despite having various personnel to manages the human resource department. Interestingly, numerous vendors have since sprung up to offer Human resource outsourcing; this indicates that the shift is fast changing. This paper (1660 words) attempts to investigate the need for, or against human resource outsourcing as well as try to find out the activities that are likely to be outsourced by multinational companies.

Human resource is used in organisations to refer to the function within an organisation that deals with the implementation of the policies, and approaches relating to the administration of individuals, it also refers to the overall workforce; the individuals that make up the workforce in an organisation (Grover, 2006, par.1). Human resources refer to the workforce potential of an organisation and give the capacity of the individuals.

Different organisations evaluate their human resource potential to improve productivity. Human resource management is defined as the function within an organisation responsible for recruitment and management of the individuals or workforce (McLean, 2006, par.3). It also deals with the development and training of the employees (Heathfield, 2010, par. 1). Outsourcing services involves contracting an organisation’s activities to another provider; Human resource outsourcing is always done by major companies especially when it involves offshore recruitment. These multinational companies consider the number of resources and time they can save by contracting (Overby, 2010, par.2).

Many companies do human resource outsourcing for various reasons and this depends on the activities of the companies. However, in most cases, there is a common stand on some of these reasons. The reasons for Human resource outsourcing may include: to lower cost of hiring (Engardio, Arndt & Foust, 2006, par. 2 ); because of the complexities involved in the hiring of potential employees, economies of scale play a major part in this and outsourcing is vital to control the labour rates which relieves the company of the unnecessary costs that could be incurred in the process.

Inadequate in-house resources for conducting the hiring may also be a reason; for companies with complete specializations, they may not have the resources required to recruit; it, therefore, follows that outsourcing will be undertaken, outsourcing for human resources helps the companies control their budgets, and this is possible since they can predict the cost of outsourcing and plan for the future.

Outsourcing also saves time, and this time can be put on productivity hence more returns. It lowers the amount of investment used for internal infrastructure; every company has different activities in its budget, these budgets are sometimes tedious and straining to accomplish, outsourcing human resources would help in efficiency since the activities left are manageable.

Human resource outsourcing helps the organisation involved to improve on their human resource management and development of skills; this is because, during the process of recruiting, the company can access skills and resources from the outsourcing company. Outsourced workforce tends to be more effective and efficient in their activities of production, this gives an edge to the company as higher quality production is achieved.

The integration of the modern world has forced businesses to locate globally; this has caused a stretch to the multinational firms, posing them complex challenges on how to embed the different skills, practices and cultures of their potential employees. It is only imperative that they outsource for them since the specialized employment agencies would have a better understanding when dealing with different groups of people (Lam, Gold & Moore, 2008, pp.1).

The fact that the world is turning global to every multinational company with time due to the advancement in technology, communications and economies clearly explain the cross-boundary that takes place within the businesses, this has exposed diversity in skills required for each area thereby leading to complexities. It calls for an equally complex human resource management that can handle the variations, and can no longer be done fully without the help of the outsourcing agency; otherwise, it would be too involving and may not achieve the desired results (Brewster, Sparrow & Vernon, 2007, pp. 3).

Other reasons for outsourcing are: outsourcings has done for the company to focus on its core activities, to access intellectual gain from the outsourcing company, for contract purposes which are legally binding as opposed to the internal Human resource recruitment (Rothman, 2003, par. 2), an operational specialization which may not be in the organisation. Outsourcing exposes the team to a pool of potential employees (Manning et al. 2008, par. 1).

It also enhances the capacity of the company where they lack the adequate capacity for human resources (Lewin & Couto, 2006, par.4). It can be used as a channel for change since the outsourcing agency can be a sign of the change (Lewin & Couto, 2006, par. 1). The risk is transferred to the outsourcer and thus improves the capacity development of the organisation (Engardio & Kripalani, 2006, par. 3). These among others are clear advantages for Human resource outsourcing for the better management and enhancement of the workforce capacity (Couto et al. 2007pp. 35-37).

As much as Human outsourcing may be relevant, various negative aspects would make it undesirable to organisations. It is outright that a company that relies on outsourcing will have little credit for Human resource management skills. Human resource managers who outsource would less likely get promoted compared to those with equal workforce capacity but does not outsource, this is because the former is never credited with the success but the outsourcing agency (Sullivan, 2003, par. 1).

Generally, outsourcing can hurt the competitive advantage and productivity level of an organisation, because outsourcing depends on outsourcers who in turn depend on vendors. The economic model of corporate businesses is aimed at becoming the best firm with more superior employees than its competitors; this value is undone by outsourcing since the economic model of the vendors allows them to directly provide similar services to other competitors. Others may even develop solutions at the company’s expense then sell them to its competitors, this makes outsourcing unreliable in providing a competitive advantage to the firm.

Human resource also limits the development of the human resource department of the company; the department should be let to develop its staff as this improves the capacity. There is a general thought that outsourcing is cost-effective, but this is rarely realized, and on very few occasions are proofs given for the amount saved, besides the vendors must make profit out of the service, this beats the logic of cost-effectiveness, Outsourcing may then be even more expensive to handle.

Company secrets are vital for its continued success; when outsourcing, company secrets may be compromised and this may negate the company’s image or provide a competitive advantage to its competitors. Other reasons against outsourcing are unstable pricing by the vendors, it eliminates the internal staff and leaves the business at the mercy of the vendor. The company culture may also be too complex for the vendors to understand (Sullivan, 2003, par. 2-17).

Activities in Human resource management are numerous, they include, Staffing, rewards, employee development, employee maintenance, and employee relations. Given the size of the business, it would be advisable for the team of a multinational company to outsource the following activities: staffing; during the initial recruitment, the company would rather outsource as there would be access to a large pool of employees to select.

Also, they would most likely be from different parts of the world and would be easier to access than in their respective company centres (McNamara, 2010, par. 1). Another activity that may be outsourced are the rewards, this would be good for the external evaluators and will be more impartial in their decisions as they have no direct contact with the employees (Bratton & Gold,1999, pp.14-15).

In dealing with Human resource outsourcing, the organisation must consider, it’s, size which must be big, to have the financial advantage on outsourcing, the kind of business is also very important; very complex companies would be difficult for the vendors to understand, it is, therefore, wise to outsource those activities that are manageable to achieve the expected outcomes.

It is better to use the best of breed approach which involves outsourcing from different vendors, this helps in improving the quality of service as the vendors compete to improve on their services. For better outcomes, the company must also make an informed choice of the vendors by researching them. At this point, the company must prioritise its needs to find the best vendor that fits its requirements.

Human resource outsourcing is vital for multinational companies to embed the different cultural, cross-national, expertise and access the best of the best in a large pool of employees. Time is saved for the company and it can focus on its other responsibilities to improve its productivity.

On the other hand, outsourcing is very complex, it is workable but has its limits, Credit is most likely taken by the vendors and the internal human resource management is limited, this also affects the growth and expansion of the department. Vendors may also cut costs when they start services to lure the company but later revise their prices upwards, causing instability to the company’s financial base.

Human resource management is highly applicable for multinational companies. It is difficult in complex businesses where the vendors may not understand the risks involved. An efficiently managed Human resource outsourcing gives the company a competitive advantage hence maximized returns. However, caution should be when outsourcing to mitigate overuse.

Bratton J., Gold J. 1999.  Human Resource Management: Theory and Practice . Web.

Brewster C., Sparrow P., Vernon G. 2007. International Human Resource Management . CIPD. Web.

Couto V. et al. 2007. Offshoring 2.0:Contracting Knowledge and Innovation to Expand Global Capabilities . Offshoring Research Network. Service provider Report. Web.

Engardio P. & Arndt M. & Foust D. 2006. The Future Outsourcing . Business Week. Web.

Engardio P. & Kripalani M. 2006. The Rise of India . Business Week. Web.

Grover,L.,L.. 2006. Advances in Developing Human Resources. Vol. 8, No. 3. Web.

Heathfield,S, M. 2010. What Is Human Resource Management? About. Guide. Web.

Lam A., Gold M., Moore F. 2008. Mn327 International human resource management 2008/09 . Web.

Lewin A. Y. & Couto V. 2006. Next Generation Offshoring: The Globalization of Innovation. Survey Report . Offshoring Research Network. Web.

Manning et al. 2008. A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent . Academy of Management Perspectives. Web.

McLean G. N. 2006. National Human Resource Development of HRD: A focused Study in Transitioning Societies in the Developing World . Web.

McNamara C. 2010. Human Resource Management . Authenticity Consulting,LLC. Web.

Overby S. 2010. Outsourcing Definition and Solutions. CXO Media Inc. Web.

Rothman J. 2003. 11 Steps to Successful Outsourcing: A Contrarian’s View . Computer world. Web.

Sullivan J. 2003. The Case Against Outsourcing Human Resource . Dr. John Sullivan’s. Web.

Cite this paper

Select style

• Chicago (A-D)
• Chicago (N-B)

BusinessEssay. (2022, November 13). Advantages and Disadvantages of Human Resource Outsourcing. https://business-essay.com/advantages-and-disadvantages-of-human-resource-outsourcing/

"Advantages and Disadvantages of Human Resource Outsourcing." BusinessEssay , 13 Nov. 2022, business-essay.com/advantages-and-disadvantages-of-human-resource-outsourcing/.

BusinessEssay . (2022) 'Advantages and Disadvantages of Human Resource Outsourcing'. 13 November.

BusinessEssay . 2022. "Advantages and Disadvantages of Human Resource Outsourcing." November 13, 2022. https://business-essay.com/advantages-and-disadvantages-of-human-resource-outsourcing/.

1. BusinessEssay . "Advantages and Disadvantages of Human Resource Outsourcing." November 13, 2022. https://business-essay.com/advantages-and-disadvantages-of-human-resource-outsourcing/.

Bibliography

BusinessEssay . "Advantages and Disadvantages of Human Resource Outsourcing." November 13, 2022. https://business-essay.com/advantages-and-disadvantages-of-human-resource-outsourcing/.

• Cross-Cultural Issues in HRM
• Employee Illnesses, Stress, and Burnout
• Needs Assessment in HRM
• Al Nakheek Company: Effective Motivational Strategies
• H2O Organization: Human Resource Information System
• Human Resources Management: Effective HR Planning Programme
• People Power: Driving Fashion Forward
• International Human Resource Policy for Expatriates
• Nalco Company: Human Resource Management
• Employee Involvement: Human Resource Planning