Making a Decision to Outsource: Strategic Constraints

Many companies are reluctant to dive into outsourcing ocean because of various reasons of strategic nature. As far as strategic goals are touched upon, managers are concerned with the following issues:

- Risks and dangers of transferring too much managerial power to one partner. Companies fear to be too dependent on one offshore partner because its failure to meet commitments will definitely result in large losses for outsourcing company. To reduce such risks companies may diversify them, selecting several offshore vendors for partnering, in addition to thorough geopolitical analysis.

- Danger for senior management to become obsolete. When part of functions is transferred to offshore partner, it usually results in lay-offs. This can become a serious obstacle for companies willing to outsource, as they may face strong opposition from its own personnel and labor unions. In both cases indecisiveness and delays in acting may result in low effectiveness or even unprofitableness of outsourcing.

- Danger of becoming dependent from offshore provider. When considering outsourcing possibility, the companies should assess the consequences of vendor failure. The results of such analysis may vary greatly for different companies. To reduce possible risks of failure to carry out delivery schedules, companies shall work out legally binding agreements with tough conditions and heavy penalties.

- Protection and security of confidential information. Most mature offshore vendors enjoy more impressive security practices than internal ones of the outsourcing companies. However, the risk of commercial data theft or security breach significantly increases when working in international business. Although this issue rarely presents a serious obstacle to making a decision to outsource, it should not be underestimated, the requirements must be documented and the methods and integration with vendors defined.

- Outsourcing results in knowledge transfer to outside party and vendors' personnel training. There is an ever-present pressure to retain functions perspective for outsourcing within the company, even if it means increasing staff and training new personnel. The most common argument is that there is always a possibility of returning functions that have been outsourced back into the company. Companies must carefully assess their business knowledge and determine whether its spreading might compromise companies' practices and hinder achieving strategic goals.

Outsourcing is not just making a decision and enjoying the benefits of it. It is an ongoing process of strategic analysis and vendors' relations management. Company must clearly identify its strategic goals, and decide whether outsourcing part of its functions will be beneficial or it may hinder its strategic development. If you are still not sure what option to choose, you may contact us, and our analysts will definitely help you.

Denis Syropushchinsky is a Marketing Manager in Qulix Systems - Offshore Outsourcing Software Development Company, located in Minsk, Belarus, Eastern Europe. Our client-oriented approach and effective offshore software development services are the things that will help you to achieve your business goals. If you have further questions about offshore outsourcing, please contact us. Copyright 2005 Denis Syropushchinsky. All rights reserved. This article may be freely reprinted on your websites. We only require that the article and the resource box at the bottom of each article remain unchanged.

---

Why Six Sigma Will Work in Healthcare

If ever there were an industry where we want zero... Read More

Making a Decision to Outsource: Strategic Constraints

Many companies are reluctant to dive into outsourcing ocean because... Read More

Microsoft Great Plains in Aerospace & Defense industries ? implementation & customization highlights

Microsoft Great Plains fits horizontal markets clientele and in case... Read More

To Go or No Go, That Is The Question

Last week we talked about a few of the ways... Read More

Completing the Annual Planning Process

Imagine an office without a desk, or lights, a computer,... Read More

Home Improvement Construction Project Planning

The first task before hiring a contractor for home remodeling... Read More

Business Results - Four Critical Success Factors

Scenario OneDuring a recent presentation, a business owner was given... Read More

Online Promotion: 10 Ways To Use Focus Groups To Ignite Your Profits

A focus group is a group of employees or current... Read More

Fail to plan... or Plan to FAIL??

Running a business, whether it be an offline multi-billion dollar... Read More

Strategic Planning Fundamentals

Strategic planning is vital while starting a new business or... Read More

Changing Strategy Without Losing Your Customers - Three Vital Steps to Refining Your Strategy

American Eagle Outfitters and Wet Seal Stores have issued statements... Read More

Writing a Business Plan for Success in Business and for Funding

Writing a business plan to help you direct and manage... Read More

Top Reasons To Form A Strategic Business Alliance

A strategic alliance is when two or more businesses join... Read More

Do You Really Need a Business Plan?

"I don't need a business plan."Neither did Alice in Wonderland."Would... Read More

Business Plan Descriptions of Computer System

Entrepreneurs often give little if any consideration to their computer... Read More

Family and Friends Referrals Make the Best Franchisees

As a franchisor it is imperative that you seek, find... Read More

Restaurant Startup - Part 1: Market Research ? What are Potential Competitors Doing?

The first step in starting a restaurant is proper planning.... Read More

How Good Is a Business Plan To Your Business?

You know you need a business plan. You probably realize... Read More

Invalid Excuses for Poor Business Results - Rising costs

Note to Northwest Airlines ? It's not about fuel costsFor... Read More

Regroup - How To Do It And Why It Works

Regroup?is this a new management trend? Not a chance! Regroup... Read More

Call in the SWOT Team: Produce More Opportunities to Expand Your Business

Have you ever done a SWOT analysis? No, it's not... Read More

Turning On The Lights

Fun From The StartFor those with the will to start... Read More

The Impact of Price Popularity on Profits

The goal of almost every business owner is to generate... Read More

Succession Planning: Problems Getting Started

A survey released by the American Institute of Certified Public... Read More

How to Write a Business Plan in Five Steps

People often ask "What makes a good business plan? Or,... Read More

Attributes of Companies You Dont Want to Buy!

There are no "rules of thumb" in the pursuit of... Read More

Business Planning and the ?Bozo? Factor

"Bozo" ? A clown with a forlorn look, always finding... Read More

Invalid Excuses for Poor Business Results - The Economy

Note to Rite Aid and CVS: It's not about the... Read More

Site Selection and Demographic Tips for Establishing Outlets

Many cities have home pages on the Internet. Many of... Read More

If You Dont Focus, Innovate and Evolve, You Die

After 128 years of business, a household word, Montgomery Wards,... Read More

Corporate Contingency Planning

Part 1A few weeks ago I attended a seminar sponsored... Read More

Resilience

I. INTRODUCTIONThe term resilience, which is of frequent use in... Read More

Planning For The Slow Season Of Your Business To Increase Sales

Every business experiences slower periods. For some, they sell more... Read More