Outsourcing basically means hiring a third party to do your work or your client's work for which you don't have skills to have it performed in-house or it is more expensive to have it done in house. By outsourcing you can get the job done at a lesser cost.

The other benefits are to get several portions of a project to be completed simultaneously. You can also save costs by taking advantage of geographical situations, it is normal for hiring companies to outsource their projects to India or East Europe or East Asia.

But this is not a blessing without its short comings. One of the main problems is that you experience a lack of control. You must also ensure that gains in cost saving are not lost by spending more on over management.

Please refer my previous article “Ten (10) Outsourcing Fears and Steps to Ward Them Off” too.

Having third party brokers is a way of avoiding this situation. In short the project management is given to middle level service provider. It is his job to get the best services from open market. He takes the responsibility.

In totally outsourcing the whole project the client may faces a risk. But the reason for his doing that is that the job is labor intensive or skill intensive, therefore, it is cheaper to outsource.

Then you are compelled to trust third parties. But this increases the risk of management. Chances are always there that if something goes wrong in project implementation the costs may increase instead of cost saving.

In many cases the hirers don't have technical know how to cross check quality of services provided which makes them dependant upon contractor who may misguide also regarding the services being provided. In IT projects this is one of the main risks involved in outsourcing.

Competence outsourcing : To avoid risks associated with total outsourcing, the projects should stay within the competence available. Though, generally it is not possible. The reason for outsourcing is that the job cannot be achieved by the hirer himself therefore, it has to be outsourced.

This problem can be easily solved by hiring staff with sufficient competence. Though, you should avoid all risks involved in total outsourcing but it may prove as costly as getting the job done in house.

The alternative is to look for a project management team with technical and non technical expertise. If the job is to be outsourced in a single project within portfolio of business activity then it is uneconomical for the hirer to hire permanent staff.

Co-sourcing : “ Here co-sourcing comes in to play. It is two tier outsourcing where we create a buffer between highly technical service provider and less technically qualified client.


The maximum risk is when the client out sources for the first time with a technology they have never used before. Co-sourcing reduces the risks of hirer companies. By considering the hirer companies put the second layer between provider and themselves to oversee projects sometimes they have not planned to outsource certain parts of projects to be outsourced but during co-sourcing they find it economical to do so.

The client gets a superior service while saving costs. The service provider saves time by doing the job in guidance of technically competent team and the co-source grows on its solid base and experience.


http://www.va4business.com/business/42/be-informed-and-reduce-the-risk-of-total-outsourcing/