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Pros and Cons of Limited Outsourcing

June 10, 2014

There has been much controversy surrounding outsourcing during the last few years because of the high unemployment rates that prevailed during the Great Recession in Western countries. Though these economies have come out of recession, the debate about outsourcing has not abated. The debate, simply, has moved to a different plane. Currently, the question making the rounds is whether outsourcing should be limited or not.  To answer this question, it is important to know the pros and cons of limited outsourcing.

Limited outsourcing means companies limit the number of vendors to which operations are outsourced. Most of the times, the outsourced companies are large enterprises that have a variety of skills to meet the needs of different businesses. There are many advantages and disadvantages that come with this type of outsourcing.

The obvious advantage with this strategy is that it limits overhead expenses for the company because it has to manage only a smaller number of vendors. Such a strategy also makes accountability easier because managers have to talk only to a single point of contact. Over time, it helps to strengthen the ties between the outsourced and outsourcing company, and this helps to make communications smooth.

Despite these advantages, it is not always the right avenue. Firstly, limited outsourcing reduces the flexibility for companies to choose the latest technology. At the pace at which technology is evolving, this lack of flexibility can even hinder the competitiveness of companies in the long-run. Another disadvantage is that the company is limited to the choices and skills provided by the outsourcing firm. If the outsourcing firm does not have a particular capability, then the company is most likely to miss out on the chance to implement that capability.

To avoid these disadvantages, it is important for companies to be open to the idea of widening outsourcing options as needed. 




Edited by Maurice Nagle

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