Outsourcing, in essence, refers to the elimination or reduction of particular tasks internally in exchange for price reduction by an external party for the same or better quality and quantity of tasks. Such tasks and decisions are not a relinquishment of control but rather an attempt to improve cost efficiency and process improvement. Outsourcing has many advantages, including cost reduction, increased internal human capital capabilities, and process improvement. Nevertheless, there are certainly potential disadvantages that may include the creation of artificial dependency, a decrease in the potential development of expertise, and a potential loss or decrease of employment opportunities.
The essential concept of outsourcing may be divided into domestic and international. Both have advantages and disadvantages. Advantages of domestic outsourcing may include the creation of new jobs as well as supporting the local and domestic economy. Advantages of international outsourcing may include establishing cross-national and geographic relations, which may aid in market penetration and labor and raw material cost reduction. Both domestic and international outsourcing may also include public relations issues and potential commercial legal difficulties.
Nevertheless, as in any business decision, the question of outsourcing is rather complex. To conclude that outsourcing is either required or advisable, a given organization must examine many facets and factors of internal issues, organizational dynamics, return on investment, local and regional political consequences, and selecting a particular vendor.
Ultimately, the decision to use a technique and strategy that would lead to outsourcing must be in the context of the organization’s mission statement, vision, and long-term strategy. It is virtually impossible to assign a particularly positive or negative value to the concept of outsourcing without examining it in the context of a particular organization and economy. Yet it is obvious that outsourcing is another tool enabling business decision-makers and stakeholders to enhance organizational effectiveness and efficiency further while increasing profitability for all stakeholders.
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