BY: STEPHANIE CELIS
Outsourcing can really be beneficial for a number of reasons. Some companies enjoy benefits such as reduced labor costs, larger workforces, access to industry experts and increased flexibility through outsourcing. However, despite the obvious advantages to outsourcing there are some situations when outsourcing is not a good idea. Although there a number of scenarios where outsourcing is a viable business option there are other scenarios where outsourcing is not the best idea. In these situations it is best to keep the work in-house rather than attempting to make an outsourcing situation work out. When Outsourcing is Too CostlyOne of the primary advantages of outsourcing is a cost reduction. In many cases outsourcing results in reduced labor costs because costs such as social security, health care and workers' compensation are eliminated. Additionally, the increased efficiency resulting when tasks are outsourced to industry experts can also result in a cost reduction. Despite these many opportunities for cost reductions, there are some situations where outsourcing might be the more expensive alternative and it may also lead to a financial loss instead of a gain. This may include a situation where the cost of outsourcing to a highly specialized expert exceeds the budget for the project. Fees for individuals with highly specialized degrees or areas of expertise are often quite expensive. Another possible situation is one where finding an individual qualified to complete specialized tasks would be too expensive of a process. When Outsourcing Causes You to Lose ControlEven when tasks or projects are outsourced the company responsible for the work likes to continue to manage the project and keep close tabs on the progress of tasks. It is important for the company to continue to manage the project even after it has been outsourced because they are the ones who are ultimately responsible for the successful completion of the project. Whenever an individual or company wants to deny the company access to project files or documents, outsourcing is a bad idea. The company who has the vested interest in the outcome of the project should never be excluded from participating in making decisions regarding the project. Before outsourcing a task or project care should be taken to establish criteria for the management of the project. Depending on the length and complexity of the project it may also be wise to schedule regular meetings to provide updates on the progress of the project. During this time the contractor should provide the employer with all documentation necessary to evaluate the progress of the project and verify it is still on track for completion by the established deadline. When Outsourcing is Not PermittedSometimes outsourcing is not a good idea simply because it is not permitted by contract requirements. Some project contracts may have stipulations stating the work cannot be outsourced to an individual or to another company. Inserting such a clause into a contract document is well within the rights of the clients. When they hire a particular company to complete a project or task, they expect all work related to the project or task to be completed by members of that company unless they specified otherwise when negotiating the contract. Violating the contract documents in this situation is not a good idea. The company could be penalized by the client. Penalties may include withholding payment or refusing to award future projects or tasks to the company.
http://www.streetdirectory.com/travel_guide/16669/outsourcing/when_outsourcing_is_not_a_good_idea.html


BY: RICARDO SALAZAR
The gist of a new layoff study by the Labor Department is that very few U.S. job losses can be blamed on "offshoring" -- a finding that is already being slammed by critics who say the government dramatically undercounted the number of jobs heading overseas to cheaper labor markets.
At the same time, the findings are expected to buttress the arguments of various industry groups and economists who say sending technology, manufacturing and other jobs to India and China and other cheaper labor markets is in the long-term best interests of the economy at large. As the Knight Ridder news service put it, "While certain industries, manufacturing and software among them, were found to have been hit harder than others, the report implies that public anxiety about jobs moving overseas, called offshoring, may be overblown."
http://www.washingtonpost.com/wp-dyn/articles/A33998-2004Jun11.html


BY: JORGE MONTES DE OCA
Outsourcing referrs to a company that contracts with another company to provide services that might otherwise be performed by in-house employees. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas. There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers, and have fewer overhead expenses to worry about. Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, that might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries. There are some disadvantages to outsourcing as well. One of these is that outsourcing often eliminates direct communication between a company and its clients. This prevents a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon its outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.


BY: FELIX LIZARRAGA
Outsourcing Boom is Over

A new study finds that the outsourcing boom is coming to a close due to experienced customers becoming more savvy and picky about the work they hand to outsourcing providers.
The outsourcing boom has passed and maturity is setting in, according to a new study from consulting firm DiamondCluster International in Chicago.
The leveling off is due in part to experienced customers becoming more savvy and more picky about the work they hand to outsourcing providers.
The reticence on the part of some customers is due to disappointment with the performance of their outsourcing providers, the study found.
"I expected the abnormal termination trends to go down, but they remained pretty high," said Tom Weakland, leader of the outsourcing advisory services practice at DiamondCluster. Abnormal terminations occur when customers scrap a contract before its scheduled completion date.
Premature contract terminations, particularly with onshore providers, continue to be a prevalent trend, he noted.
The study found that 47 percent of buyers reported they had prematurely terminated at least one outsourcing relationship in the prior 12 months.
Only 28 percent of buyers terminated at least one offshore deal, but 42 percent of onshore customers had done so. Of those, 53 percent cited poor performance by their onshore provider.
In addition, customers also questioned whether theyre receiving value from onshore providers, Weakland said.
"Theres negativity building in onshore versus offshore. We see more people terminating onshore deals in order to put things offshore," said Weakland.
He said offshore providers are seen as more attractive because they can increasingly boast certifications, such as CMMI, to go with their significantly lower costs.
The disaffection is leading to an overall decrease in outsourcing spending. In the 2004 DiamondCluster survey, no respondents said they would decrease their outsourcing spending. However, this year, 9 percent said they would decrease their spending, although most buyers do remain committed to increasing their purchasing.
This years study findings echo those of DiamondClusters study a year ago, which found dissatisfaction among customers who chose the lowest-priced bidder and found that early contract terminations were way up.
The 2005 survey found that many customers were looking seriously at China as an offshore outsourcing destination, a trend that continues this year, according to Weakland.
However, this years survey also shows strong interest in Canada as an offshore location. In addition, Eastern Europe emerged as the second fastest-growing offshore destination, behind China.
Despite the turnoff overall, Weakland said that U.S. IT managers are adapting to outsourcing and gradually implementing it as a comprehensive corporate strategy, rather than as individual contracts for distinct IT tasks.