Answered! Outsourcing is a very controversial practice but is prevalent among U.S. companies. What are some of the pros and…

Outsourcing is a very controversial practice but is prevalent among U.S. companies. What are some of the pros and cons of outsourcing? Why do you think many firms are experiencing an increase in their levels of outsourcing?

Expert Answer

 Outsourcing is the practice of purchasing a specific function from an outside service provider. In other words, it is the practice of contracting-out functions of the business to an expert. Insourcing, by contrast, is the practice of maintaining a specialist function in-house, but buying in external expertise on a short-term basis to balance peaks and troughs in demand for that expertise. More countries are successfully emulating India’s fast growing outsourcing business sector and are targeting a broader array of services for growth, according to Duke University’s Offshoring Research Network and PricewaterhouseCoopers. Foreign governments are providing incentives for new companies to start selling services to firms located in high-cost regions including the United States, according to a survey of 500 global outsourcing companies.

The number of outsourcing firms is growing fast in Latin America, Eastern Europe and Asia. “New entrants from these emerging regions can be expected to intensify competition among providers, especially for commoditized contract centers, business process outsourcing and IT services,” says the study.

Of recent concern is the ability of businesses to outsource to suppliers outside the nation, sometimes referred to as offshoring or offshore outsourcing (which are odd terms because doing business with another country does not mean you have to go offshore). In addition, several related terms have emerged to grasp various aspects of the complex relationship between economic organizations or networks, such as nearshoring, multisourcing and strategic outsourcing. One of the biggest changes of recent years has come from the growth of individuals using online technologies to use outsourcing as a way to build a viable service delivery business that can be run from virtually anywhere in the world. The preferential contract rates that can be obtained by temporarily employing experts in specific areas to deliver elements of a project purely online means that there is a growing number of small businesses that operate entirely online using offshore outsourced contractors to deliver the work before repackaging it to deliver to the client. One common area where this business model thrives is in provided website creating, analysis and marketing services. All elements can be done remotely and delivered digitally and service providers can leverage the scale and economy of outsourcing to deliver high value services at vastly reduced end customer prices.

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