Disadvantages of Outsourcing

Outsourcing sounds great at first blush. But, there's a reason that most companies still hire employees, rather than outsource everything to third-party firms. Before you take a leap into outsourcing, make sure you understand the disadvantages of outsourcing.

It's hard to ignore the benefits of outsourcing.

Disadvantages of Outsourcing

Greater flexibility, improved focus and potential cost savings are all factors that have made both domestic and offshore outsourcing attractive options for many routine small business functions.

But outsourcing isn't all upside. There are also some drawbacks to outsourcing that could affect the quality of your outputs and the cohesiveness of your organization. If farming work out to a third party seems like a good fit for your small business, here are a few of the disadvantages of outsourcing that you need to know about before you pull the trigger.

  • Quality issues. Unlike many of your permanent employees, outsourcing providers won't necessarily be committed to producing the highest possible quality of output. And as long as they meet the requirements described in their contract, there is little you can do about it. This can be especially problematic with offshore outsourcing providers for whom English is a second language.
  • Tunnel vision. Outsourcing vendors rarely have the ability or interest to see your company's big picture. Most of the time they are so focused on the task at hand that they neglect how it integrates with your overall mission and the efforts of other departments. Although you can provide them with background information, don't expect outsourced workers to provide deliverables that seamlessly integrate with strategic initiatives.
  • Loss of control. Small business owners are often frustrated to discover that they are unable to exert influence and control over outsourced personnel. If you haven't worked with an outsourcing provider before, you'll have to adjust to the fact that they control the manner in which they complete assigned tasks.
  • Investment risk. When you outsource, there is always the risk that the provider could go out of business or go bankrupt, and that you will lose the investment of time and energy you have made in the relationship before you receive full deliverables.
  • Confidentiality. If the job you are outsourcing requires the provider to have access to customer accounts, proprietary processes or other sensitive information, you could open the door for a security breach.
  • Blowback. Finally, you'll need to be prepared for the possibility that your decision to outsource won't be received well by your permanent employees and/or your customer base. Although it's important to be sensitive to public opinion, it shouldn't be the only factor in your decision.

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