The Advantages and Disadvantages of Outsourcing

What is Outsourcing?

Outsourcing is an allocation of specific business processes to a specialist external service provider.

Most of the times an organization cannot handle all aspects of a business process internally.
Additionally some processes are temporary and the organization does not intend to hire in-house
professionals to perform the tasks. Once the task is assigned to the service provider, he will take the
responsibility of carrying out the tasks and maintaining the organization’s assets.

However prior to outsourcing any component of your business to a third-party vendor, it is essential
to understand the advantages and disadvantages of outsourcing. Although outsourcing presents a
variety of benefits to your organization, it could also pose difficulties if not outsourced to the right
service provider.

The most commonly outsourced streams of business include.

• Content Development
• Web Design and Maintenance
• Recruitment
• IT Maintenance
• Logistics
• Manufacturing
• Technical/Customer Support

Why do organizations outsource their business process?

The key factors which have led to a growing trend of outsourcing are

• Lack of expert-labor in some portions of the business process

• Availability of cheaper labor, whilst not comprising on the quality of output
• Ability and feasibility to concentrate on the other crucial business process

These factors have specifically contributed to most of the outsourced partners originated form India.
Expertise in communication capabilities, technical expertise and favorable financial packages are the
most important advantages of outsourcing to India.

Advantages and Disadvantages of Outsourcing

Outsourcing most commonly known as offshoring has two sides to it. Most of the time, the
advantages of outsourcing overshadow the disadvantages of outsourcing.

The Advantages of Outsourcing

• Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in
their field. The outsourced vendors also have specific equipment and technical expertise, most

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 of the times better than the ones at the outsourcing organization. Effectively the tasks can be
completed faster and with better quality output
• Concentrating on core process rather than the supporting ones: Outsourcing the
supporting processes gives the organization more time to strengthen their core business
process.
• Risk-sharing: one of the most crucial factors determining the outcome of a campaign is risk-
analysis. Outsourcing certain components of your business process helps the organization to
shift certain responsibilities to the outsourced vendor. Since the outsourced vendor is a
specialist, they plan your risk-mitigating factors better.
• Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire
individuals in-house; hence recruitment and operational costs can be minimized to a great
extent. This is one of the prime advantages of offshore outsourcing.
• Outsourcing your non-core activities will give you more time to concentrate on your core
business processes
• Offshoring can give you access to professional, expert and high-quality services
• With outsourcing your organization can experience increased efficiency and productivity in
non-core business processes
• Outsourcing can help you streamline your business operations
• Offshore outsourcing can help you save on time, effort, manpower, operating costs and
training costs amongst others
• Outsourcing can make your organization more flexible to change
• You can experience an increased control of your business with outsourcing
• Your organization can save on investing in the latest technology, software and infrastructure
as your outsourcing partner would be investing in these
• Outsourcing can give you assurance that your business processes are being carried out
efficiently, proficiently and within a fast turnaround time
• Offshoring can help your organization save on capital expenditures
• By outsourcing, your company can save on management problems as your offshore partner
will be managing the team who does your work
• By outsourcing, you can cater to the new and challenging demands of your customers
• Outsourcing can help your organization to free up its cash flow
• Sharing your business risks is possible with outsourcing
• Outsourcing can give your business a competitive advantage as you will be able to increase
productivity in all the areas of your business
• Outsourcing can help your organization to cut is operational costs to more than half

The Disadvantages of Outsourcing

• Risk of exposing confidential data: When an organization outsources HR, Payroll and
Recruitment services, it involves a risk if exposing confidential company information to a
third-party.
• Synchronizing the deliverables: In case you do not choose a right partner for outsourcing,
some of the common problem areas include stretched delivery timeframes, sub-standard
quality output and inappropriate categorization of responsibilities. At times it is easier to
regulate these factors inside an organization rather than with an outsourced partner.
• Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden
costs involved in signing a contract while signing a contract across international boundaries
may pose a serious threat.

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 • Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of
multiple organizations at a time. In such situations vendors may lack complete focus on your
organization’s tasks
• At times, it is more cost-effective to conduct a particular business process, rather than
outsourcing it
• While outsourcing services such as payroll processing services and tax preparation services,
your outsourcing provider will be able to see your company’s confidential information and
hence there is a threat to security and confidentiality in outsourcing
• When you begin to outsource your business processes, you might find it difficult to manage
the offshore provider when compared to managing processes within your organization
• Offshoring can create potential redundancies for your organization
• In case, your offshore service provider becomes bankrupt or goes out of business, your
organization will have to immediately move your business processes in-house or find another
outsourcing provider
• The employees in your organization might not like the idea of you outsourcing your processes
and they might express lack of interest or lack of quality at work
• Your outsourcing provider might not be only providing services for your organization. Since
your provider might be catering to the needs of several companies, there might be not be
complete devotion to you and your company
• By outsourcing, you might forget to cater to the needs of your valuable customers as your
focus will be on the business process that is outsourced
• In outsourcing, you may lose your control over the process that is outsourced
• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred
while signing a contract between companies. You might also have to spend a lot of time and
effort in getting the contract signed
• With outsourcing, your organization might suffer from a lack of customer focus
• There can be several disadvantages in outsourcing, such as, renewing contracts,
misunderstanding of the contract, lack of communication, poor quality and delayed services
amongst others.

Network model
The network model is a database model conceived as a flexible way of representing objects and their
relationships. Its distinguishing feature is that the schema, viewed as a graph in which object types are
nodes and relationship types are arcs, is not restricted to being a hierarchy or lattice.

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The network model's original inventor was Charles Bachman, and it was developed into a standard
specification published in 1969 by the CODASYL Consortium. CODASYL (often spelt Codasyl) is
an acronym for "Conference on Data Systems Languages". This was an Information technology
industry consortium formed in 1959 to guide the development of a standard programming language
that could be used on many computers. This effort led to the development of COBOL.

CODASYL's members were individuals from industry and government involved in data processing
activity. Its larger goal was to promote more effective data systems analysis, design, and
implementation. The organization published specifications for various languages over the years,
handing these over to official standards bodies (ISO, ANSI, or their predecessors) for formal
standardization.

Hierarchical database model

A hierarchical data model is a data model in which the data is organized into a tree-like structure.
The structure allows repeating information using parent/child relationships: each parent can have
many children but each child only has one parent (also known as a 1:many ratio ). All attributes of a
specific record are listed under an entity type.

In a database, an entity type is the equivalent of a table; each individual record is represented as a row
and an attribute as a column. Entity types are related to each other using 1: N mapping, also known as
one-to-many relationships. this model is recognized as the first data base model created by IBM in the
1960s

The most recognized and used hierarchical databases are IMS developed by IBM and Windows
Registry by Microsoft.

Examples of Hierarchical Data Represented as Relational Tables

An organization could store employee information in a table that contains attributes/columns such as
employee number, first name, last name, and Department number. The organization provides each
employee with computer hardware as needed, but computer equipment may only be used by the
employee to which it is assigned. The organization could store the computer hardware information in
a separate table that includes each part's serial number, type, and the employee that uses it. The tables
might look like this:

EmpNo
First
Last Name Dept. Num
Name
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100 Sally Baker 10-L
101 Jack Douglas 10-L
102 Sarah Schultz 20-B
103 David Drachmeier 20-B
Serial Num Type User EmpNo
3009734-4 Computer 100
3-23-283742 Monitor 100
2-22-723423 Monitor 100
232342 Printer 100

In this model, the employee data table represents the "parent" part of the hierarchy, while the
computer table represents the "child" part of the hierarchy. As shown, each employee may possess
several pieces of computer equipment, but each individual piece of computer equipment may have
only one employee owner.

Consider the following structure:

EmpNo Designation ReportsTo

10 Director
20 Senior Manager 10
30 Typist 20
40 Programmer 20

In this, the "child" is the same type as the "parent". The hierarchy stating EmpNo 10 is boss of 20,
and 30 and 40 each report to 20 is represented by the "ReportsTo" column. In Relational database
terms, the ReportsTo column is a foreign key referencing the EmpNo column. If the "child" data type
were different, it would be in a different table, but there would still be a foreign key referencing the
EmpNo column of the employees table.

This simple model is commonly known as the adjacency list model, and was introduced by Dr. Edgar
F. Codd after initial criticisms surfaced that the relational model could not model hierarchical data.

INTRANET:

An intranet is a private computer network that uses Internet Protocol technologies to securely share any part
of an organization's information or network operating system within that organization. The term is used in
contrast to internet, a network between organizations, and instead refers to a network within an organization.
Sometimes the term refers only to the organization's internal website, but may be a more extensive part of the
organization's information technology infrastructure. It may host multiple private websites and constitute an
important component and focal point of internal communication and collaboration.

Benefits of intranet:
Workforce productivity: Intranets can help users to locate and view information faster and use
applications relevant to their roles and responsibilities. With the help of a web browser interface,
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users can access data held in any database the organization wants to make available, anytime and -
subject to security provisions - from anywhere within the company workstations, increasing
employees' ability to perform their jobs faster, more accurately, and with confidence that they have
the right information. It also helps to improve the services provided to the users.

• Time: Intranets allow organizations to distribute information to employees on an as-needed

basis; Employees may link to relevant information at their convenience, rather than being
distracted indiscriminately by electronic mail.
• Communication: Intranets can serve as powerful tools for communication within an
organization, vertically and horizontally. From a communications standpoint, intranets are
useful to communicate strategic initiatives that have a global reach throughout the
organization. The type of information that can easily be conveyed is the purpose of the
initiative and what the initiative is aiming to achieve, who is driving the initiative, results
achieved to date, and who to speak to for more information. By providing this information on
the intranet, staff have the opportunity to keep up-to-date with the strategic focus of the
organization. Some examples of communication would be chat, email, and or blogs. A great
real world example of where an intranet helped a company communicate is when Nestle had a
number of food processing plants in Scandinavia. Their central support system had to deal
with a number of queries every day.[3] When Nestle decided to invest in an intranet, they
quickly realized the savings. McGovern says the savings from the reduction in query calls was
substantially greater than the investment in the intranet.
• Web publishing allows cumbersome corporate knowledge to be maintained and easily
accessed throughout the company using hypermedia and Web technologies. Examples
include: employee manuals, benefits documents, company policies, business standards,
newsfeeds, and even training, can be accessed using common Internet standards (Acrobat
files, Flash files, CGI applications). Because each business unit can update the online copy of
a document, the most recent version is available to employees using the intranet.
• Business operations and management: Intranets are also being used as a platform for
developing and deploying applications to support business operations and decisions across the
internetworked enterprise.
• Cost-effective: Users can view information and data via web-browser rather than maintaining
physical documents such as procedure manuals, internal phone list and requisition forms. This
can potentially save the business money on printing, duplicating documents, and the
environment as well as document maintenance overhead. For example, Peoplesoft "derived
significant cost savings by shifting HR processes to the intranet".[3] McGovern goes on to say
the manual cost of enrolling in benefits was found to be USD109.48 per enrollment. "Shifting
this process to the intranet reduced the cost per enrollment to $21.79; a saving of 80 percent".
Another company that saved money on expense reports was Cisco. "In 1996, Cisco processed
54,000 reports and the amount of dollars processed was USD19 million".[3]
• Enhance collaboration: Information is easily accessible by all authorised users, which
enables teamwork.
• Cross-platform capability: Standards-compliant web browsers are available for Windows,
Mac, and UNIX.
• Built for one audience: Many companies dictate computer specifications which, in turn, may
allow Intranet developers to write applications that only have to work on one browser (no
cross-browser compatibility issues). Being able to specifically address your "viewer" is a great
advantage. Since Intranets are user-specific (requiring database/network authentication prior
to access), you know exactly who you are interfacing with and can personalize your Intranet

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 based on role (job title, department) or individual ("Congratulations Jane, on your 3rd year
with our company!").
• Promote common corporate culture: Every user has the ability to view the same
information within the Intranet.
• Immediate updates: When dealing with the public in any capacity, laws, specifications, and
parameters can change. Intranets make it possible to provide your audience with "live"
changes so they are kept up-to-date, which can limit a company's liability.
• Supports a distributed computing architecture: The intranet can also be linked to a
company’s management information system, for example a time keeping system

EXTRANET

An extranet is a computer network that allows controlled access from the outside, for
specific business or educational purposes. An extranet can be viewed as an extension of
a company's intranet that is extended to users outside the company, usually partners,
vendors, and suppliers. It has also been described as a "state of mind" in which the
Internet is perceived as a way to do business with a selected set of other companies
(business-to-business, B2B), in isolation from all other Internet users. In contrast,
business-to-consumer (B2C) models involve known servers of one or more companies,
communicating with previously unknown consumer users. An intranet is like a DMZ in
that it provides access to needed services for channel partners, without granting access
to an organization's entire network.

Advantages
• Exchange large volumes of data using Electronic Data Interchange (EDI)
• Share product catalogs exclusively with trade partners
• Collaborate with other companies on joint development efforts
• Jointly develop and use training programs with other companies
• Provide or access services provided by one company to a group of other companies, such as
an online banking application managed by one company on behalf of affiliated banks

Disadvantages
• Extranets can be expensive to implement and maintain within an organization (e.g., hardware,
software, employee training costs), if hosted internally rather than by an application service
provider.
• Security of extranets can be a concern when hosting valuable or proprietary information.

Wide area network

A wide area network (WAN) is a computer network that covers a broad area (i.e., any
network whose communications links cross metropolitan, regional, or national
boundaries [1]). This is in contrast with personal area networks (PANs), local area
networks (LANs), campus area networks (CANs), or metropolitan area networks (MANs)
which are usually limited to a room, building, campus or specific metropolitan area (e.g.,
a city) respectively.

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WAN connection technology options
There are also several ways to connect NonStop S-series servers to WANs, including via the
ServerNet Wide Area Network (SWAN) or SWAN 2 concentrator, which provides WAN client
connectivity to servers that have Ethernet ports and appropriate communications software. You can
also use the Asynchronous Wide Area Network (AWAN) access server, which offers economical
asynchronous-only WAN access. Several options are available for WAN connectivity:[2]

Sample
Bandwidth
Option: Description Advantages Disadvantages protocols
range
used
PPP,
Point-to-Point connection
Leased HDLC,
between two computers or Most secure Expensive
line SDLC,
Local Area Networks (LANs)
HNAS
A dedicated circuit path is
Circuit created between end points. 28 - 144
Less Expensive Call Setup PPP, ISDN
switching Best example is dialup kbit/s
connections
Devices transport packets via a
shared single point-to-point or
point-to-multipoint link across a
X.25
Packet carrier internetwork. Variable Shared media
Frame-
switching length packets are transmitted across link
Relay
over Permanent Virtual Circuits
(PVC) or Switched Virtual
Circuits (SVC)
Similar to packet switching, but
uses fixed length cells instead Best for
of variable length packets. Data simultaneous Overhead can be
Cell relay ATM
is divided into fixed-length use of voice considerable
cells and then transported and data
across virtual circuits

Transmission rates usually range from 1200 bit/s to 24 Mbit/s, although some connections such as
ATM and Leased lines can reach speeds greater than 156 Mbit/s. Typical communication links used
in WANs are telephone lines, microwave links & satellite channels.

Recently with the proliferation of low cost of Internet connectivity many companies and
organizations have turned to VPN to interconnect their networks, creating a WAN in that way.
Companies such as Cisco, New Edge Networks and Check Point offer solutions to create VPN
networks.