Outsourcing gives managers the more freedom to focus on other problems, and free

Question

Outsourcing gives managers the more freedom to focus on other problems, and frees up more money to spend on other expenses. Do you think In house though is better because of security or personal touch?

"Businesses that choose to outsource IT, whether offshore or through a local contractor, convert those fixed expenses to variable ones, freeing up capital for use in other areas. This makes the business more appealing to investors, since the company has more capital to funnel into areas of operations that directly produce revenues."(Gluck, 2017)

Reference

Gluck, S. (2017) Benefits Vs. Risks of Outsourcing IT Services. Retrieved from http://smallbusiness.chron.com/benefits-vs-risks-outsourcing-services-2504.html

Explanation / Answer

Advantages of outsourcing:

- Lower labor cost:

The main benefit of outsourcing is that you can offshore a higher costing process to a country where labor cost for the same operation is relatively lower which can free up the capital of company for other most important operations. Lower labor cost will benefit company in terms of costing and that amount can be used in core functions development.

- Increased efficiency:

Due to outsourcing company will have focus on main activity of business and will increase its efficiency in working up core functions. More time and expert work will be done on important function which will lower the burden on top executives of company.

- Focus on core business:

Since company do not have to focus on less important operation it can save time and efforts for core functions of company and solely concentrate on it with maximum effort on it.

Risk:

Hidden cost:

Sometime outsourcing agent doesn’t reveal hidden cost for those functions in initial stages and will reveal it at later stages.

Loss of security:

The important data will be leaked to third party and data will be no longer secure for the company. The data will be open to third party and there is risk that third party can misuse that for own use or for another use, hence privacy is not guaranteed in outsourcing:

Poor work:

Third party will not work as much better as company on given functions so you cannot be sure in work quality or management quality of company.

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