Advantages and disadvantages of outsourcing Essay

Advantages and disadvantages of outsourcing - Essay Example Various functions of the business can be outsourced. The function which are most popular in outsourcing are IT functions, customer care, human resource, financial functions, marketing function etc. Nike the famous sports accessories company had outsourced the work of manufacturing shoes to countries like India and China as this will reduce the cost is an example of outsourcing. Off shoring is also a type of outsourcing. When a company outsources its work to other companies which are situated in different countries is known as off shoring. The main off shoring companies are Price Waterhouse Coopers, HSBC, TCS, Wipro, IBM, Capgemini, Genpact etc. the various type of outsourcing are business process outsourcing, knowledge process outsourcing, finance and accounting outsourcing, legal process outsourcing, human resource process outsourcing etc. Outsourcing has resulted in increase in the number of employment. The process of outsourcing mainly consists of four stages they are 1) identifyi ng whether outsourcing is required by the company 2) identifying and selecting the activities which can be outsourced 3) developing the contract 4) delegating the authority to the service provider so that the working can be smooth. The contract contains mainly three things they are the price at which the service will be provided, the legal terms and condition and the service level agreement. Outsourcing can be done by function, region and industry. 2. Growing Importance of Outsourcing With every passing day outsourcing is becoming popular. As per a study conducted by Capgemini more than 70% of executives think that in today’s competitive world outsourcing is important for survival. About 70% executives feel that savings made by outsourcing can be used for growth and 60% feel that flexibility can be achieved through outsourcing. Companies in manufacturing sectors prefer outsourcing more than the companies in service sector. The decisions of outsourcing are taken after assessin g the profitability and companies, ability to grow. Companies who do outsourcing can invest their savings for future growth and innovation. Thus these companies are in better position than the companies who do not do outsourcing as they can save less than the former ones (Brady, 2011). Outsourcing helps the company not only to save money but also to achieve expert service. The firms who do the outsourced work have the human resource who are specialised to do that particular work. In this way the company can utilise expert skill that to without making any capital investment. Thus through outsourcing companies achieve reduction in cost as well as quality service. This is the main reason of growing popularity of outsourcing. Outsourcing is becoming a major business activity which has the potential of becoming an industry. In figure 1 we can see the growth of outsourcing in different sectors. As per the figure about 61% of outsourcing is done in software development, 58% in website and e- commerce, 55% in hosted application, 53% in disaster recovery service and 32% in data centre operations. The use of outsourcing has been increased most in software development organisations. There is almost 14% increase in outsourcing in website and e-commerce sector. The second largest increase in outsourcing is in hosted applications sector. In help desk activities there is no decrease in outsourcing. Thus one can find that every sector is involved in outsourcing. The activities outsourced ranges from