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The Trade Off of Outsourcing Services

With every business decision that is made there is some kind of trade off that comes with it. When an organization decides to outsource some of their services it is usually to reduce cost or because they do not have the expertise to do it in house. According to a survey conducted by Consero Group, however, there is more risk involved in working with outsourced vendors.

The article, “ Vendors not sufficiently focused on minimizing risk” suggest that 75% of companies that share services with outside vendors feel that vendors are not managing risk appropriately, thus increasing risk. (link to article below).

This is a huge eye opener to vendors and organizations that offer different services to their clients in understanding that one of the greatest competitive advantages is providing value to the customer; that value being increased quality and “zero deficiency”. The customer wants to make sure that their vendor will not put them in a situation where they have to deal with legal issues due to an efficiency problem in quality control causing a product recall, for example. Trusting outsourced vendors to deliver the expected value leaves organizations able to focus on their core business.

Although the amount of shared services are increasing and are proven to be very effective, it is still a major concern to many organizations who may reevaluate the factors of their decisions. If enough companies decide to create in-house services rather than outsource, this could negatively affect vendors and eventually drive them out of business. Reducing costs is always at the top of any organization’s list but once increased risk of compromising quality occurs, resulting in long term losses, cost reduction will no longer be a priority.

http://www.scmr.com/article/vendors_not_sufficiently_focused_on

_minimizing_risk_according_to_consero_su

  • By Danielle on 7.23.2014 at 12:27 pm

    Though I have never thought about it before, I can see how outsourcing can create complications. Thanks for sharing!

  • By Eric on 7.23.2014 at 1:00 pm

    Great post!

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