Business Advantages and Disadvantages of Outsourcing

An increasingly popular commercial trend has been outsourcing. It has been estimated in 2011 alone more than 2.2 million jobs were outsourced by U.S. firms and 43% of IT services firms undertaking some type of outsourcing (Statistic Brain, 2012). For this level of outsourcing to exist there must be potentially significant advantages, however there are also likely to be disadvantages.

Key advantages may be summarized as gaining efficiencies while reducing both costs and some risks. Outsourcing services to a specialist firm may allow an organization to gain expertise that they may not be able to afford to bring in if recruiting for in-house...

Experienced high level experts can be hired by outsourcing firm with the higher salaries associated with the expertise affordable as each client is only using the expertise for a limited number of hours (Kroenke, 2011). This not only allows does access to services needed, and may improve quality with better quality inputs, it is also a cost reduction strategy; if the services do not require a full time employee the costs will be lower; relative to the time needed (Kroenke, 2011). Outsourcing firms may also benefit form their specialization in being able to gain economies of scope and scale, which may also help to provide cost advantages and increased efficiencies (Mintzberg et al., 2008)?…