Disadvantages Of Outsourcing And Offshoring

Outsourcing and offshoring are different and I will cover each. Outsourcing is taking a specific task, multiple tasks or even large projects either on a short term or long term basis and utilising an external organisation to do this work and then bill for services. A simple example is legal work. A company may outsource to a legal firm, the work of drawing up legal contracts for their resellers. The advantages can be that the legal firm specialises in this work and can hence do it more efficiently. The firm can also be up to date on legal contract requirements and have resources and infrastructure in place to quickly and efficiently perform this task. Timelines can be reduced by leveraging the capacity of one or more (if needed) organisations

Another disadvantage can be environmental, the country may not have strict environmental guidelines in place and waste and damage to the environment may occur where it would be restricted or not possible if operations were run in the original country/region. Negative PR (Public Relations) can be another disadvantage when such practices are discovered and shared. This can also apply to unions and groups who wish to see opportunities for employment and skills remain in the host country rather than offshore, they may mention or target the company involved which will result in negative PR and hurt profits. Some customers who are human rights and environmental focused may purchase competitor products even at higher prices to make sure they do not support such practices even though it may be indirect and further up the chain. This can potentially hurt sales for the company.

For both of these solutions, outsourcing and offshoring, if managed right they can be an effective solution that offer value to the company and its customers, when not handled correctly it can be costly in multiple