Disadvantages of Outsourcing

Disadvantages of Outsourcing for a Business

When a business chooses to outsource certain functions, management needs to be aware of the pitfalls of choosing this course of action. The following are concerns associated with outsourcing:

• The business has to be able to trust that their outsourcing partners, whether they are individuals or other businesses, will be able to deliver the product or service as agreed. The outsourcing business may suffer severe consequences if the outsourcing partner does not have sufficient staff to perform the work or runs into financial difficulties.
• Companies that outsource no longer have complete control over the processes used by the business, since these functions will be handled by the other company or individuals hired to work as independent contractors.
• Company employees may resent the fact that some work is being outsourced and may be reluctant or refuse to work with the outsource staff.

Outsourcing and Company Image

Another disadvantage to outsourcing is how the outsourcing company may be perceived by the public at large. A number of people are reluctant to conduct business with a company that is known to outsource some of its functions. This is especially true if the outsourced tasks are being performed by workers in Third World countries.

The perception among members of the general public may be that the corporation is taking good-paying jobs away from workers in Western countries and replacing them with workers who are willing to work for less pay. They note that when companies outsource tasks to a cheaper source of labor, that the prices they pay for that company's products or services aren't reduced as a result.

The business, although it isn't doing anything illegal, may appear to be unethical because of its business practices. Consumers are becoming increasingly well educated about how and where major corporations do business. They are much more likely to exercise their right to choose to deal only with companies that appear to share the same values they do.

Loyalty Issues with Independent Contractors

When a business hires a person to work for it and invests time and money in training that individual, the employee has is more likely to have a certain degree of loyalty to the company than an independent contractor who is hired to perform certain tasks only.

The contractor is working for him or herself, not the hiring company. This person does not have the same depth of loyalty as a company employee is expected to have.

Lack of Continuity

Employees have a depth of knowledge about their employer's vision, goals, and practices that outsourced workers simply don't have. There is a sense of continuity that the company cannot achieve when it decided to use outsourcing as a business strategy. Employees understand that there are consequences for their actions and since they have an ongoing relationship with the employer, they will need to take responsibility for their actions when performing their assigned duties.

Any business needs to weigh the disadvantages of outsourcing very carefully before deciding to proceed with this course of action. It would not be a very responsible decision on the part of management to look only at the bottom line when determining when and how to outsource some tasks.

It won't do the business any good if they enter into an agreement with another company to provide services it if means that the business suffers a loss to its reputation in the public's mind. Any choice to outsource should be made with these factors firmly in mind.