The Benefits and Risks of Outsourcing

Because many businesses in the US have more often began outsourcing different business products instead of doing them in-house, it is important to understand why outsourcing may be the best option. Although many tie outsourcing to foreign markets, outsourcing can include both foreign and domestic markets. By entering into a contractual agreement, outsourcing allows organizations to pay for services they need. This gives the option for a business to get professionals to perform services for them that the business may not have the staff for. Outsourcing provides a cost saving-strategy that is usually more affordable. Ultimately,

Some providers of outsourcing may be providing the same service for several companies at the same time. Due to this, they will not be able to provide 100% of their attention to any of these companies and their quality may not be up to par. This can reflect negatively on the company as the customer calling may not be aware that the call center is being run by an outside source and they may directly relate it to the company. So unless the service being provided is truly top notch, it may prove to be less beneficial to the parent company than expected.

It is a concept that has evolved from a manufacturing perspective to a strategic perspective, which views the concept as a way for organizations to focus and be more competitive. The basic premise of outsourcing is that a specialist organization can perform a particular service more efficiently than can internal operations because a specialist organization has an inherent advantage in producing and delivering a service. Superior technology, management skills, or economies of scale may contribute to this perception. The type of sourcing relationship depends on whether a long-term or short-term need exists. To save funds used for benefits for regular employees, temporary workers are hired. In this case, the organization (outsourcer) provides all necessary resources except the workers, who are provided by the vendor. For long-term services, the vendor has full responsibility for delivering the service; the outsourcer provides only a liaison.

Outsourcing is a method used by many corporations in which their products are manufactured in foreign countries often for cheaper labor.This method method of productions has it’s pros and cons.

Outsourcing is a business tactic that consists of moving production of a product to either a sub-tier vendor or moving operations away from the company’s home country in order to eliminate costs. Recently, the most common way of outsourcing is to purchase property in underdeveloped countries and build production facilities there. The cost savings comes from cheap land for factories, cheaper production labor, and cost savings due to lesser taxes and regulations. Unfortunately, with these benefits, many exterior factors are resulted.

Initially, the purpose for offshoring was due to producers wanting to lower fixed costs and also seeking lower waged workers. By moving job duties abroad, producers were also able to avoid unionized workers (Gupta & Sao, 2009). In recent years, offshoring has also become popular in higher waged jobs such as software development. Outsourcing is very similar to offshoring, where a firm purchases inputs or services from another firm, but the firm is also located in the United States (Harrison & McMillan, 2006). A staffing agency is an example of outsourcing. A company is assigned by a client, and employees of the staffing company work directly with the employees of the client (Houseman, 2007).

Outsourcing is a process of a company obtaining the services from an outside vendor. These services can be of different forms like IT services for a software company, voice services for a customer support industry, legal services for companies and small part suppliers for manufacturing companies etc. The main reason for a company to outsource its services is cost savings

Also resulting in redundancy payments needing to be paid to any staff that are not redeployed. As well as the cost of keeping on employees extra costs can occur when outsourcing which is why it is important the contracts are studied attentively to ensure both companies agree on what is covered in the agreed cost (Tayauova

Before acquiring its current negative connotation, outsourcing referred to the practice of turning over parts of a business to a company that specialized in that activity. For instance, Cisco Systems, Brocade Communications, and other leading original equipment manufacturers (OEMs) outsource their manufacturing to Solectron Corporation, where I was a summer intern. By partnering with Solectron, OEMs can gain access to the latest equipment, process knowledge, and manufacturing expertise without making substantial capital investments. In essence, outsourcing to Solectron enables OEMs to focus on their core competencies of research and development and sales

Outsourcing is defined as "the process of purchasing goods and services from outside vendors rather than producing the same goods or providing the same services within the organization." Outsourcing does not come without risks, but it also has its benefits as well. Gaining services or products from outside sources can be very beneficial, considering the alternative that the firm will have to produce them themselves. However, on main risk that is incurred when outsourcing is that when a firm does outsource, they leave the supply of that product or service in the hands of someone of whom they cannot control, contrary to controlling their own supply. Ethical issues are at hand here, as well as trust issues. As you will see in this paper, many different opinions about outsourcing are present among different financial investors and financial officers. Management teams and management leaders are the head personnel that weigh the pro 's and con 's of outsourcing, and this paper will briefly summarize the various opinions, pro 's, con 's, large benefits, and ethical issues dealing with outsourcing.

• Offshoring entails sourcing part of the purchased inputs outside of the country. • Outsourcing means contracting with other companies to do some or all of the functions of a firm, such as production or accounting. • Outsourcing decisions affect the boundaries of the firm, what production takes place within the firm and what is purchased from outside the firm. • Changes in offshoring may be, but are not necessarily, related to changes in outsourcing.

Many Companies nowadays have engaged outsourcing strategies to reduce cost. Instead of doing it by their own staff, buying machines for fabrication. they engaged vendor to do it for them. There are pros and cons when dealing other company to provide/manufacture/assemble goods. Advantage of outsourcing is that It's undeniably true that it's cheaper to rent a factory -- and its workers -- than to maintain them yourself. Good outsourcing must have a very good planning to overcome some changes. The contract must be very well done, well define to adopt changes and will not result to unexpected rise of cost. Rise of unexpected cost is then called the overlooking hidden cost. Some of the hidden cost are as follows:

When using outsourcing in this way, companies are mostly based on the product life cycle. The product life cycle is a template that describes the development of a product. The template is usually divided in four steps; the introduction stage, the growth stage, the maturity stage and the decline stage. The introduction stage is defined as the period when a product is launched onto the market, when the product is still unknown so the sales figures are low and the marketing costs are high. Next step is the growth stage, which is when the product has become more recognized and is considered beneficial so the sales increase remarkably. This stage implies the greatest opportunity for sales to expand. Next step is the maturity stage, the highlight period of the product. This is when sales keeps expanding, but the marketing costs usually decreases since the product is already established and recognized on the market. After this stage, the decline stage takes place. This period defines decreasing sales, often because of other competitors or substitutes that appear on the market (Shaw, 2014). According to these four steps, companies often choose to already outsource their products in the maturity stage. By relating strategically to the product life cycle, the company can focus on new products instead of the effort they would have had to engage in due to the decline stage (Andersson, V. Grigoriadou, E. Quist, C. Ruhdin, C.

Outsourcing is an effective cost-saving strategy when used properly. It is sometimes more affordable to purchase a good from companies with than it is to produce the good internally.

Outsourcing refers to hiring an outside, independent firm to perform a business function that internal employees might otherwise perform. Many organizations outsource jobs to specialized service companies, which frequently operate abroad. The outsourcing trend stands to continue; the latest wave of outsourcing impacts the information technology field. IT outsourcing includes data center operations, desktop and help desk support, software development, e-commerce outsourcing, software applications services, network operations and disaster recovery.2