M2 - Advantages and Disadvantages of Outsourcing

What is outsourcing?:

Outsourcing is where a company pays another company to help or do work for them. In many cases, the outsourced work could be done by the company itself, but there are often financial benefits in outsourcing the work. The most common jobs for outsourcing are, call centres and E-mail services. These types of jobs are normally handled by companies that specialise in those jobs.

Advantages of outsourcing:

Well first of all, outsourcing work to another country will save the company a considerable amount of money. The reason for this is that in the UK, the minimum wage is £6.31. In other countries such as India, it is much lower; therefore the company can then pay the workers less.

Also, outsourcing works will also give skilled people in other countries jobs that may be scarce where they are.

Another advantage for outsourcing work overseas is that things like health care and benefits don't apply because they are outside the UK, which means more money in the company’s pockets.

If the company is looking to expand its business, outsourcing is a cheap way to start in other countries.

Outsourcing is not only overseas; you can outsource work within the country you are working in. You are paying other companies to work for you. The reasons for this would be that it's either cheaper, or the company you are outsourcing to, are professional at the work they do, or they are perfect for the job.

Outsourcing work also gives the company time to do other work that is of a higher priority, reducing the stress on the company and the allowing them to meet the deadline for a project or work.

Disadvantages of outsourcing:

When work is outsourced to other countries it can cause many problems, for example, many call centres are often Indian, which can cause a language barrier between both the customer and the person working for the call centre. Also, in a different country, they may have different terminology, so if you're trying to fix a fault on your PC, but the keyboard layout is different, you will find it hard to keep up with what they're saying.

Another problem with outsourcing overseas is the time zone constraints, for example, if you give work to say a company in the USA, from the UK, there is a 9 or so hour difference, so the communication between the two companies will be small.

Due to companies outsourcing, this is causing redundancies within the company because they are getting people who will work for less to do the job. Although it's good that it saves the company money its also bad because it means that more and more people are becoming unemployed and claiming benefits.

If a company outsources work to another company, there can also be a delay. I there company who the work has been outsourced to has higher prioritised work of their own, then it may take them longer to get the work done for the company. This means the set deadline to meet may not be met resulting in many things, including: wasted time (people will have nothing to do until they have received the work from the outsourced company), money could be lost (if they're selling an item, they may lose out on buyers), and customer dissatisfaction (they will lose out on potential customer, therefore relationships with the customers will be ruined because the company told them when it would be ready, but it has been delayed by a few weeks or even months.