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Advantages and disadvantages of outsourcing

By Kamyar Shah

Republish: EasyPublish™
Published: 25Mar2008
Word count: 453
Viewed: 920 time(s)

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Outsourcing in general is geared toward one main goal of cost savings. Certainly there are substantial quantity of other reasons such as reconfiguration of human resource capital, increase in divisional or organizational effectiveness and efficiency. However, the ultimate goal is to increase bottom line by reducing overall costs. E-Business or ecommerce is no exception. In order to determine the viability and suitability of outsourcing any or all business processes a cost saving analysis as well as return on investment maybe the most suited tools to make such determination.

The most current trend in the outsourcing appears to be the marketing aspects of an ecommerce site which may include Search Engine Optimization (SEO), Link Campaigns, online organic marketing, offline promotion as well as niche marketing. Most of these functions occur after the initial design and implementation with the exception of SEO. Other common attempts to outsource include article submissions, data storage, data processing, ad servings, CRM, as well as many other but similar popular third party services.

The advantage of outsourcing ecommerce projects could include cost and time savings in initial creation, reducing cost of maintenance, as well as taking advantage of third party up to date expertise in design, optimization and functionality. Though all of these functions can be equally created internally, the cost efficiency is certainly questionable. The influencing factors may include talent acquisition and maintenance, continues educational and training costs, purchase of hardware and software as well as their respective maintenance cost, as well as managerial cost of supervision and evaluation of human resources as well as tools.

At the first glance, it seems like a no brainier that once a viable third party is selected, outsourcing of e-business is a simple choice of economic decision making. However, there is more to it than it meets the eyes at first. The most pressing issues is one of strategic nature. The outsourcing of vital functions such as ecommerce is certainly a two sided coin. The cost benefits are great yet the strategic reliance on a third party which essentially creates dependency as well as lack of internal expertise may have a greater impact on long term strategic vision than the cost saving may justify.

Reliance and dependency on a third party eliminates the negotiation capabilities of the outsourcing entity. Equally, the lack of internal capabilities and expertise certainly creates a vacuum in terms of knowledge creation and maintenance which is equally significant for long term strategic vision and goals. Nevertheless, even the most novice business personnel and entities have not only observed but have actively participated in outsourcing. It is interesting to see the long term impact of relinquishing total or partial control over vital functions by means of outsourcing.

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