Advantages & Disadvantages

of Outsourcing
Introduction
 To compete effectively, it is essential for
business to concentrate on what they do best
and where they can add value.
 Organizations have switched emphasis to
concentrate on their core competencies in
order to increase market penetration and
become more competitive.

2
Core competencies
 Core competencies are the capabilities of an
organization that truly distinguish it from its
competitors.
 They are unique capabilities upon which the
success of the company depends.
 They are what gives an organization its clear
leadership position as seen by its customers.

 All remaining activities are non-core

competencies.
3
Outsourcing
 Outsourcing involves the transfer of the
responsibility for carrying out an activity to an
external service provider.
 Outsourcing covers a range of different types
of functional areas (in terms of non-core
competencies), including human resources
management, product management,
marketing management, and most commonly
the management information systems.
4
Outsourcing the IT functions
 Can the IT departments enhance our
corporate financial goals?
 Are the current IT resources capable of
supporting new technology?
 Is there a quicker, more effective method to
handle IT issue?

 these questions may help to decide to outsource

or not the information technology functions.
5
Examples of IT functions
 Managed network services.
 End user computing services.
 Applications development and maintenance
services.
 Service desk / Help desk.
 Cross functional equipment and software
services.

6
Advantages of Outsourcing
 Minimizing cost on IT infrastructure.
 IT consultants are fully trained on the latest
technologies.
 Service providers can offer more up-to-date
advanced technologies.
 No need to retain technically qualified in-
house personnel.
 Continuous IT support coverage without
having to rely on only one or two key people.
7
Disadvantages of Outsourcing
 Hidden costs are difficult to calculate or
prepare for.
 Some degree of control is lost.
 Sometimes, communication skills are not
satisfactory in the for every team-player of
the service provider.
 Possible loss of flexibility in reacting to
changing business conditions.
 Risk of fraud and confidentiality issues.
8
Conclusions
 To go for outsourcing or not a company must
make a comprehensive cost benefit analysis.
 The main reason to outsource is freeing up
resources to invest in a core competency.
 It should never be outsourced an activity that
is part of the core competencies (…that's
giving away the company's future!).