Discuss the proposition that in choosing to outsource a function Essay

Discuss the proposition that in choosing to outsource a function managers commonly underestimate the potential hazards and costs - Essay Example ..........................................................................................5 Cost cutting...........................................................................................................5 Strategic advantage..............................................................................................5 Underestimated risks and hazards of outsourcing to the outsourcer................................6 Cultural ...............................................................................................................6 Regulatory ...........................................................................................................7 Informational ......................................................................................................9 Organizational ...................................................................................................11 Why and how such limitations and underestimations happen? .................................... .13 Lack of a proper procedure and framework .....................................................13 Unreal perception of the core business and competencies...............................13 Putting wrong person on the job.......................................................................14 Conclusion....................................................................................................................14 References........ ons now try to focus on their core competencies and get external service providers for their supplementary functions to gain instant access to their expertise, service levels and synergistic benefits from the partnership of the two. This has been termed as ‘outsourcing’ in the business jargon and lately assumed much of significance in business scenario (Winkler 2009:22). Caught in the dilemmatic ‘make-or-buy’ decision, organizations and more importantly the managers often underestimate the risks, possible hazards and hidden costs of their outsourcing decision. Superficially, outsourcing seems to provide cheap labour supply, external expertise, synergies in competencies and perfection of all activities but in-depth analysis of outsourcing decision and related factors reveal serious consequences related to labour enforcements, cultural asymmetries, lack of control and governance over the vendor operations, threat of information leakage and many more which have a direct bearing on the financial, organizational and social viability of the outsourcer’s business. This paper seeks to address this emerging situation with a critical knack. Commencing from an introduction and historical overview of outsourcing and reasons why managers outsource, the main body of the paper comprises major risks and potential hazards encountered in effective management of outsourcing decisions. Discussion of underestimated costs in such happenings and why they happen is also included with a checklist to better the proposition. Examples of insurance, shipping and IT industry have been inserted at appropriate places to anchor the understanding of the concept and provide a practical meaning to the underlying aspects. Historical overview of outsourcing The advent of outsourcing dates back to