Briefly discuss various merits and limitations of outsourcing.
Briefly discuss various merits and limitations of outsourcing.
Merits of Outsourcing
(i) Concentration on core competence— By outsourcing non-core activities the management or the company can concentrate on core activities crucial for the success and growth of the enterprise.
(ii) Reduction in cost—The outsourcing partners performs the task for various companies. So the client companies tend to gain from their economies to scale.
(iii) Growth through alliance—The outsourcing services reduce the need for investment in fixed assets and employing more number of employees as the outsourcing agencies take up the responsibilities of routine jobs. So the firm who outsource business activities tends to gain and can extra invest in expansion and growth of their business.
Limitations of outsourcing
(i) Confidentiality—In outsourcing the parent company shares its trade secrets with the captive or third parties which can be misused by these captive or third parties for their personal interests.
(ii) Sweat shopping—The firms which outsource their work prefer to outsource the work which requires doing skills and does not require thinking skills. It means by working in outsourcing companies the employees’ competence, intelligence level does not increase. They are asked to do very simple routine work which reduces thier creativity and intellectual development to work beyond this.
Merits of Outsourcing
(i) Concentration on core competence— By outsourcing non-core activities the management or the company can concentrate on core activities crucial for the success and growth of the enterprise.
(ii) Reduction in cost—The outsourcing partners performs the task for various companies. So the client companies tend to gain from their economies to scale.
(iii) Growth through alliance—The outsourcing services reduce the need for investment in fixed assets and employing more number of employees as the outsourcing agencies take up the responsibilities of routine jobs. So the firm who outsource business activities tends to gain and can extra invest in expansion and growth of their business.
Limitations of outsourcing
(i) Confidentiality—In outsourcing the parent company shares its trade secrets with the captive or third parties which can be misused by these captive or third parties for their personal interests.
(ii) Sweat shopping—The firms which outsource their work prefer to outsource the work which requires doing skills and does not require thinking skills. It means by working in outsourcing companies the employees’ competence, intelligence level does not increase. They are asked to do very simple routine work which reduces thier creativity and intellectual development to work beyond this.
