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Outsourcing Problem

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All business decisions and operations involve risks, which is a part of doing business. Outsourcing is not an exception and that is something that of course a company needs to be prepare for when making outsourcing decisions. There will be risks at every stage of the any process. It is obvious that a company needs to consider the risks involved in outsourcing its processes. Once the risks have been identified they should be analyzed and processes should be created to minimize those risks.

Some main outsourcing problems or risks can be identified in outsourcing operations.

1. Geographical problems:

Outsourcing can result in many problems that are related to the geographical location of an offshore destination. Some of these problems may include language problems, accent problems, political instability, change in laws and regulations, labor laws, cultural issues and so on.

2. Infrastructure and operational problems:

Infrastructural and operational problems can be in the form of for example insufficient communication infrastructure, undeveloped disaster recovery capacity of the country, power generation capacity, and non renewable resources availability. Thus before choosing an offshore location, it is vital for a company to make sure that all the statistics and factors support outsourcing to that destination.

3. Project related problems:

The main outsourcing problems nowadays would most probably be project related concerns. As more and more companies are outsourcing the geographical, infrastructural and operational risks can be evaluated in advance regarding that the destination is already known for its outsourcing market. For example with India and China the before mentioned risks and problems are known and have already been experienced by many companies and do not come as such a surprise. Project related problems on the other hand depend wholly on the provider, the project to be undertaken, the process of the project and the relationship with the provider. These aspects include several risk related issues such as expertise and manpower of provider, reliability and ability to execute the required tasks as agreed and for example whether the provider can fulfill the outsourcing company’s expectations.

In order to avoid the basic outsourcing problems a company should take preventive actions before hand, maintain close contact and control of the outsourced operation and its provider as well as keep up-to-date with all issues concerning the outsourced operation.

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