The Risks of Outsourcing

by Modis on June 17, 2014

The once popular trend of outsourcing appears to be coming to an end. Demand for IT outsourcing in India has already leveled off because most of what can be moved offshore already has according to The Economist. More and more businesses are beginning to look inward for their IT needs, and as a result, IT department expansion continues to be a growing trend worldwide. There are numerous potential disadvantages that businesses are beginning to consider as risks of outsourcing.

Risks of OutsourcingRisk of Outsourcing

Outsourcing IT functions, especially when the work is sent offshore, may carry business risk.

The risks include:
• Projects take too long
• Rising or hidden costs
• Loss of control of data security and disaster recovery
• No control over how services are delivered
• Lack of service quality or expertise
• Some IT functions not easily outsourced

A Global Skills Gap

Business executives around the world share the concerns of their counterparts in the United States. In PWC’s annual survey of global CEOs, 30 percent of the respondents felt confident that they would be able to find the talent they needed to grow their companies, while 58 percent said a lack of key skills is hampering their growth prospects.The leaders in outsourcing are not faring better in their own hiring. Among the world’s top ten economies, employers in Brazil, Russia, India and China are having the most difficulty filling vacancies.

Communication Difficulties

Even differences in the time zones between client and outsourcer can interfere with speedy delivery of the project. For example, an email sent during the client’s business day can arrive in the middle of the night, with the response coming back after business hours, client time.

Compliance Becomes Complicated

For some businesses, use of an outsourcer can lead to compliance issues, if the activities of a service provider don’t comply with applicable U.S. laws and regulations. This is especially a risk for companies that must comply with rules regarding data storage.

Transitioning Back to Insourcing

Because of all these disadvantages, a number of companies that have tried outsourcing are now electing to keep IT functions in-house. Our latest whitepaper not only discusses the disadvantages to outsourcing, it details the drivers behind IT department expansion and how to prepare your business. Download your copy today.

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