Intelligent CXO Issue 25 - Page 23



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think , first and foremost , we should understand what outsourcing is . According to Investopedia : “ Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company ' s employees and staff . Outsourcing is a practice usually undertaken by companies as a cost-cutting measure .” In this way , the companies get to focus on their core business operations and activities , while the outsourced company / organisation focuses on the projects assigned to them by the hiring organisation .
As with many strategic approaches , outsourcing is not immune to any pros and cons as it will be impossible .
Benefits of outsourcing
Outsourcing has several benefits within the context of business engagement or strategy .
Some of the benefits are as follows :
• Lowering the labour cost , the hiring organisation doesn ’ t have to deal with the like of hiring consultants permanently , thereby allocating the full-time employee packages for a short-term project
• Low labour risks , the company that is outsourcing the work doesn ’ t have to deal with the risks that come with the employment of the members of the project team
• Allows the hiring organisation to focus more on the core of its business , while the non-core are assigned to the outsourcing organisations / companies to deliver within the agreed time and budget
• Provide access to the experienced and talented pool , by outsourcing the work to the specialised and experienced outsourcing organisation the hiring / outsourcing company
Disadvantages of outsourcing
Some of the disadvantages are :
• Risk of IP , although there are non-disclosure and contracts that the organisations signed and agreed on , it doesn ’ t take away the potential risk of having one of the employees of the outsourced organisation sharing that , which can happen with outsourcing company employees
• Sensitive data can be tricky to manage – how should the sensitive data be handled by the third party , especially if the outsourced organisation is offshore – not within the same borders as that of the outsourcing organisation ? This will add to the security costs that need to be allocated to protect sensitive data and information
• Communication , often the communication between outsourcing and outsourced organisation can become an impediment to the relationship between two organisations . More so , if the organisations are from different regions and language
• Lack of flexibility , the contractual agreements often present rigidity in the execution of the outsourcing engagement . Any changes that need to be made to the solution or product will have to follow a stringent legal process that both have embarked on in the original agreement x www . intelligentcxo . com