Disadvantages of Outsourcing: A Closer Look at its Dark Side

Share this post

Share on facebook
Share on twitter
Share on email
Share on linkedin

Outsourcing has become the top choice of business owners in today’s weak condition of global economy. For them, it is a nice move to at least minimize the effect of the most recent financial crisis and unsteady state of economies. But, is it really a smart choice to transfer some of your business activities offshore?

The Other Side of the Coin

Who has not heard about outsourcing? Google search may give you a thousand results on its importance in the business world. It allows businesses to utilize outside resources, expertise, and skill sets while focusing on their core tasks. Also, it ensures customer satisfaction by providing utmost service 24 hours a day/7 days a week. The primary reasons of companies in venturing into the process are as follows:

  • Adept skills and expertise
  • Lower labor cost
  • Improved customer service
  • Increased productivity and efficiency
  • Effective distribution of tasks

Apart from its benefits to corporate owners, it also contributes to economic gains of countries like China, India, and the Philippines. These nations have gained popularity as top outsourcers, top choices as offshore locations. In fact, a research shows that US-based firms outsourced 2,273,392 jobs in 2011, many of which were subcontracted to these three Asian nations. Indeed, the industry has impressively changed the name of the game.

A Closer Look

Every industry has its pitfall, though. If in case it comes to your mind as an option, here are some thoughts on its disadvantages before you get hooked on trap.

  • Quality Issues– A satisfied customer reflects a successful establishment. It applies to all of the aspects of business. Lack of quality service may result to dissatisfaction and customer complaints. Thus, choose a service provider that values customers the same way your company does.
  • Loss of Business Control – In outsourcing, the third party company will be in charge of product and services administration. Accordingly, different rules, and policies may be enforced to effectively manage the business.
  • Confidentiality and Security– One of the disadvantages of outsourcing is the transfer of information. Although it is just a matter of trust, still, customer information is being transferred to offshore countries allowing them to have an access to confidential information, such as debit card or social security numbers.
  • Hidden Costs– Another downside are its hidden charges. Most likely, third party companies will  ask for additional fee for extra services.
  • Legal Concerns– Subcontracting is a complex business partnership. Therefore, legal concerns are always part of its disadvantages. Working with an offshore partner would mean compliance with data protection policies, intellectual property rights, and statutory requirements. Before choosing a service provider, it is equally important to have a detailed specification of the contract, work schedules, payment terms, and process of conflict resolutions.

The industry provides unlimited possibilities. Indeed, it makes our tasks a lot easier. Who would not take advantage of quality service at minimum cost? With all of its benefits, however, it is imperative to understand the risks it may bring to your business. Know the disadvantages of outsourcing. It is suggested to always deal with third party companies that are equally competitive, and do not compromise quality service. Remember, the process gives face and name to your business. With the cut-throat economic trend, it is significant to ensure that every dollar is wisely spent. To withstand competition, do not settle for something less.

Scroll to Top