Essay / Paragraph / Note

Outsourcing: Meaning, Advantages, and Disadvantages


Outsourcing is referred to the process of obtaining goods and services on a commercial basis, from third parties. A business house undergoes outsourcing so as to delegate work to another individual; or organization, which is usually a third party and who is not associated with the business concern. The former entrusts the charge of the completion of such delegated work in time on that person or organization. The ultimate duty of completing the task remains with the governing body of the entity delegating such a job. In outsourcing, a company forms a partnership or gets into a practice of transferring portions of its goods or services to the outside parties in place of getting them done in-house. In other words, it refers to getting part work done on the goods or services from external vendors.

Outsourcing: Meaning, Advantages and Disadvantages

Outsourcing: Meaning, Advantages, and Disadvantages


Hiring Of the right skills

A business organization gets to hire the right talent irrespective of geographical limits. The availability of the services of rare expertise or skill may be difficult to find not only within the organization but also within the same geographical region. This is where outsourcing comes in handy.

Outsourcing: Meaning, Advantages and Disadvantages

Reduction of cost

A business house goes for outsourcing as a cost-cutting measure. It is cost-effective for the business as the outsourced party is specialized in the task which could have taken more time and resources for the former to complete the same. This also enables the management to concentrate on the core areas of the business.

Saving of time

If a business concern opts for outsourcing it is going to help it to concentrate more on its core business areas. Outsourcing results in the release of the time which the organization could spend on non-core business functions can now be spent on core and productive business activities.

Addition of comfort and flexibility to the business

Outsourcing helps in sharing the business risk. It helps the business entity to invest more having less fear of failure at the same time. Outsourcing also brings flexibility to business operations.


Lack of regular monitoring

The business concern is left with partial control over the work outsourced to the external party. The day-to-day management of the work is in the hands of the outsourced partner. The business house cannot monitor the work performed by the outsourced partner on a regular basis.

Outsourcing: Meaning, Advantages and Disadvantages

Hidden costs may be high

There may be legal costs which the business has to incur so as to validate the contract. A substantial amount of financial resources and time may be spent to enter into a legal contract of partnership with the external party for the purpose of outsourcing.

Delay in rendering services

This is highly probable that the outsourced partner may be working for numerous other entities as well. Therefore, the offshore supplier party may fail in giving full attention to the work of the business entity. This is going to affect the quality of services rendered by the outsourced party.

Chances of misunderstanding and miscommunication

There can be misunderstandings between the business entity and the offshore supplier party. Any hindrance in communication may have an adverse effect on the quality of the services offered by the external party.


In any industry, there is tough competition among the firms. All business entities are looking forward to enhancing their market share, increase their profitability and develop their brand images. A price war is very common among peer business entities and all firms aim to reduce their overall costs to enhance their profits. Outsourcing is very helpful in reducing the costs as a whole for a business entity. It also helps a business to concentrate more on its strategic areas and more important functional areas rather than spending time and resources in noncore activities.

    Warning: Trying to access array offset on value of type bool in /home/u307391835/domains/ on line 2595

About the author

Rajarshi Bose

I am scorpion by birth, very passionate about art, quite humorous by nature, accounting & finance student, financial trader by hobby and last but not the least, lover of sports.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.