Loss of Control
One of the biggest drawbacks of outsourcing is the loss of control over the project or task. When you outsource work to another company, you are essentially handing over the reins and allowing them to take charge of the project.
This can be a double-edged sword. On one hand, it can free up your time to focus on other aspects of your business. However, it can also lead to communication breakdowns and misunderstandings.
For example, let’s say you are a small business owner who wants to outsource the development of a website for your company. You choose a web development company that is based in another country. While they may be able to deliver a high-quality website at a lower cost, there may be language barriers and cultural differences that make it difficult to communicate with them effectively.
Another example of the loss of control is when you outsource work that requires a high level of expertise or specialized knowledge. For instance, if your business deals with complex financial regulations, outsourcing the compliance work may not be the best option as it would require an expert who understands the specific regulations in your industry.
Case Studies
There are many examples of businesses that have struggled with the loss of control when outsourcing. One such example is Dell Computer Corporation. In 2004, Dell outsourced its manufacturing processes to a company in India called Mahendra Electronics. However, the outsourcing arrangement quickly turned sour as Dell failed to properly manage and monitor the quality of the products being produced by Mahendra.
Another example is the case of Netflix, which famously outsourced its DVD rental service to a company called MovieLabs. However, this arrangement turned out to be a disaster as it led to delays in shipping times and poor customer service. Netflix eventually brought its DVD rental service back in-house.
Personal Experiences
I have personally worked with businesses that have struggled with the loss of control when outsourcing. For instance, I worked with a small business owner who wanted to outsource the development of his company’s website to a web development company based in another country. However, communication between the two parties was poor, and there were many misunderstandings that led to delays in the project timeline and an unsatisfactory final product.
Another example is a business owner who wanted to outsource the accounting and bookkeeping of his company to a firm based in another country. However, this arrangement turned out to be a disaster as the accountants were not familiar with the specific financial regulations in the business owner’s industry. This led to errors in the financial statements, which ultimately led to legal issues for the business.
Research and Experiments
There have been many studies and experiments conducted on the effects of outsourcing on businesses. One such study was conducted by the Wharton School of the University of Pennsylvania. The study found that while outsourcing can lead to cost savings, it can also result in a loss of control and communication breakdowns.
Another study by the International Journal of Contemporary Hospitality Management found that businesses that outsource tasks to countries with lower labor costs may experience quality issues due to differences in skill levels and work standards.
Expert Opinions
Many experts in the field agree that the loss of control is a significant drawback of outsourcing.