Company at Risk
Whenever you let other parties see what is going on with your company, you are putting yourself at risk. The security and integrity of your company may be comprised by a subordinate at the outsourcing company who does not have the same ethical standards of your staff. This is especially important to consider with payroll, medical records and any confidential information about your clients that you are passing on to the outsourcing company. You need to be sure that the company you are working with can be trusted with this sensitive information.
Outsourcing Can Tie Your Company To The Financial Well-Being Of Another Company When you outsource too extensively, your business depends on the financial well-being of the outsourcing company. If you expand beyond your means too fast and end up having a company that is completely relying on outsourcing in order to stay afloat you’ll be completely at a loss if that company goes under. Imagine having to rebuild your structure from the ground up at a moment’s notice. When you outsource, you could very well be facing this problem (Ramirez, 2010).
The Future of Outsourcing What does the future hold for business outsourcing? Will it continue to be one of the top business trends in the next 10 years? Datamonitor, a London-based independent market analysis firm made a report about outsourcing showing what lessons were learned from past issues and what will drive the outsourcing industry forward. According to the report, outsourcing is continuously expanding when it comes to vertical industry reach as well as geographic scope (infobarrel. com, 2010).
Datamonitor further added that best-shoring is now considered the best emerging strategy for outsourcing business (infobarrel. ). Their study shows that more companies are choosing to outsource specific company functions to locations best suited to perform them (infobarrel. com, 2010). This way, investors would save on costs of sourcing the work domestically and this could further remove the implacability of using only one offshore location (infobarrel). The globalization of the workforce will continue to emerge and there will be a push to increase the quality of outsourcing skills set (infobarrel).
A special report by BusinessWeek (as cited in infobarrel) claims that management challenges will become more pressing as the increase in global salaries dissipate the easy cost gains from offshore outsourcing. Furthermore, the successful companies in the future will be those that take advantage of global talent to help transform the company and their industry while still providing jobs for everyone (infobarrel). Conclusion The decision to outsource can be wrought with pressures and risks.
Often managers are highly focused on cutting costs without thinking of the impacts of other, harder-to-quantify risk factors. Managers need to consider first whether or not a given business function is core to their ability to compete in the marketplace. If it is not, then it could be a prime candidate for outsourcing. If it is a core competency, the leaders of the organization must be sure that if they cannot do it themselves, they should work so they are capable internally as soon as possible. Giving out a core competency to a supplier is basically giving away the root of one’s business.
Armed with this information, managers must know how to apply outsourcing across their business when looking for cost reduction opportunities. Understanding outsourcing is not limited to manufacturing, or to moving work to a foreign supplier (Kumar & Eickhoff, 2005). References Ghimire, B. (2006). The Outsourcing Industry. Retrieved September 3rd, 2010 from http://www. associatedcontent. com/article/41369/the_outsourcing_industry . html? s inglepage=true&cat=15 Gupta, A. , (2009). Deriving Mutual Benefits from Offshore Outsourcing. Communications of the ACM, June, Vol 52.
Retrieved September 9th, 2010 from Academic Premier Database Handfield, R. (2006). A Brief History of Outsourcing. Retrieved September 3rd, 2010 from http://scm. ncsu. edu/public/facts/facs060531. html Infobarrel. com (2010). Future Trends in Outsourcing. Retrieved September 12th, 2010 from http://www. infobarrel. com/Future_Trends_In_Outsourcing Kumar, S. & Eickhoff, J. (2005). Outsourcing: When and how should it be done. Information Knowledge Systems Management, Vol. 5 p. 245–259. Retrieved September 5th, 2010 from http://iospress. metapress. com/content/8n5526lr708n37j0/