Outsourcing with pros and cons Research Paper Example | Topics and Well Written Essays - 3000 words

Outsourcing with pros and cons - Research Paper Example There are several reasons why many firms utilize outsourcing of their services, such as enhanced efficiency, cost reductions, increased flexibility and focus on core competencies. Outsourcing offers many benefits, although clearly with many caveats. The loss of skilled, expert staff is expected with outsourcing. Other risks involved with outsourcing include: loss of innovation, creativity, and flexibility and loss of control, continuity, and cooperation. However, these risk associated with outsourcing can be controlled and minimized if executed effectively. The immediate challenge facing organizations is how to make an informed offshore outsourcing decision that maximizes the benefits while minimizing the risks. An effective way to achieve the goal is to inquire how decision-makers comprehend and evaluate the factors affecting their offshore outsourcing decision. Abstract Outsourcing allows organization to reduce cost and concentrate on its core competences and to improve its activit ies. Although, outsourcing is an attractive strategy bounded by appealing benefits but it also contains some significant risks. However, these risk associated with outsourcing can be controlled and minimized if executed effectively. The immediate challenge facing organizations is how to make an informed offshore outsourcing decision that maximizes the benefits while minimizing the risks. An effective way to achieve the goal is to inquire how decision-makers comprehend and evaluate the factors affecting their offshore outsourcing decision. Abstract Outsourcing allows organization to reduce cost and concentrate on its core competences and to improve its activities. Although, outsourcing is an attractive strategy bounded by appealing benefits but it also contains some significant risks. However, these risk associated with outsourcing can be controlled and minimized if executed effectively. The immediate challenge facing organizations is how to make an informed offshore outsourcing deci sion that maximizes the benefits while minimizing the risks. An effective way to achieve the goal is to inquire how decision-makers comprehend and evaluate the factors affecting their offshore outsourcing decision. Outsourcing with Pros and Cons Introduction Outsourcing has become one of the most important management activities in recent years (Bromage, 2000). To outsource or not to outsource is one of the questions managers are increasingly asking themselves (Gunn, 2003). It is necessary to examine the degree of outsourcing and its pros and cons. The author posits that outsourcing is very beneficial to the growth of a company as it allows organization to reduce cost and to concentrate on its core competences and improve its activities. Outsourcing Outsourcing, as it applies to manufactured goods, is the practice of moving production to an outside supplier. Companies send this work to other domestic facilities or offshore. The outsourced activities can be thought of as new intermedi ate inputs or completed imports, shifting the entire production function done at home (Robert and Gordon, 1999). The outsourcing firm can then experience a reduction in the amount of labor required to continue operation. Outsourcing is a practice being used increasingly by organizations in order to combat the competitive forces within the global manufacturing sector. According to Michael Corbett, Firms extensively â€Å"use outsourcing everyday to improve the products and services they provide customers†¦. More than 90 percent of companies state it is an important part of their overall business strategy.†(Corbett, 2004: p. 3) Pros of Outsourcing Cost Savings Cost savings is the most important and most commonly cited reason for outsourcing. According to Burmahl (2001) cost savings is among the top reason to outsource. Cost-savings calculations encompass fixed costs, which include capital and administrative overhead; variable costs, which include specific supplies, service s, and labor cost for all personnel