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Advantages and Risks of Outsourcing

Today, most big companies, corporations and institutions outsource both high and low end functions to external agencies. The main reason for the popularity of outsourcing is that offers businesses many notable advantages. However, outsourcing also involves certain risks which need consideration and proper management.

Outsourcing – Manifold Benefits

The major advantage of outsourcing various back office operations such as payroll calculation, data entry, document conversion and accounting is that it enables organizations to reduce the expenses required for doing these jobs in-house. In other words, organizations do not have to appoint additional staff and set up the infrastructure to perform back office operations. Thus, outsourcing saves the valuable time of business professionals and reduces their workload, enabling them to focus on core activities. The other advantages of outsourcing include:

  • Less paperwork in the organization
  • Proper storing of business information for easy retrieval and updates
  • Reduced workload for employees which significantly increases their efficiency
  • Enhanced profits
  • Competitive business edge

Major Risk Factors

Before outsourcing their back office work, business firms should consider the risks associated with it. The risks that are commonly involved include:

  • Information sharing: when back office operations are outsourced, highly confidential official records are being shared with another organization, which can cause serious business issues.
  • Workforce vision: outsourcing negatively affects the attitude of the firm’s employees and their confidence level.
  • Loss of control: firms may not get enough control to plan and organize their activities properly, as the major functions are executed by the outsourcing firms
  • Additional investments: if the outsourcing firm has not completed the project in the appropriate manner, then these tasks have to be executed by the business firm and this would require capital investments.
  • Quality and consistency: as the entire data processing procedures are performed by a different organization, there can be variations in the quality and consistency of processed data.

Business firms usually weigh the various advantages and risks of outsourcing before making a decision on whether to outsource or not. With proper management, many of the risks associated with outsourcing can be overcome. So it can easily be concluded that outsourcing is here to stay.

About Rajeev R

Rajeev R

Manages the day-to-day operations of MOS from NY. With an interest in information technology, Rajeev has guided MOS to extensive use of digital technology and the internet that benefits MOS as well as MOS clients.