The Risks in Offshore Outsourcing


Company often outsource whole or portion of its information system function with a motive to focus more on its core business function. However, there are certain risks associated with it. These are enumerated below:

Losing Control over Information

By outsourcing, company loses control over its data and information and hence need to rely on outsiders for gaining any sort of data at a point of time. Through this, delay in decision making can be witnessed and it can even hamper the whole flow of operation. Moreover, company need to work with close partnership with the outsourcing company to remain update with all set of information. The company can losses its competency if they are unable to get timely and quality update from the outsourced function. Further, company need to work as per the strategies and norms of outsourcing company which can affect the operational efficiencies of company. In case of any disputes, company can loss its key information that can cost huge in terms of business loss. Hence, it is essential for company to maintain healthy and close relation with outsource company in order to gain necessary benefits from it. Moreover, if there arise disputes in political terms between outsourcer and outsourced company, then it can affect the outsourcing process as well and hence it might result in losing direct control over the key information outsourcing organisation.

Data Thieving and Hacking

This is yet another risk that is associated with offshore outsourcing. With the advent of technology and high competition, chances of hacking and data thieving has increased substantially. Since, data is shared over internet only in outsourcing, hence there is high risk of data hacking. From this, privacy and confidentially of the company is at risk. Such incidents can lead to losing of crucial information and same can be misused by any third party or organisation. From this, brand image of company can get spoiled and it can certainly affect the competency of business in a marketplace. To get rid from these activities, company is required to invest heavily on IT infrastructure and data encryption. With this, company need to maintain such system so that data can be shared in a secured manner. Beside this, risk of data thieving is also associated with the offshore outsourcing. It is possible that crucial data of company can be stolen by the staff of outsourced company. Hence, sound evaluation of outsourced company is required to be undertaken prior outsourcing any information system.

High Dependency over Outsourced Company

Another risk in offshore outsourcing is development of high dependency over outsourced company. From this, company is bounded by the outsourced organisation and hence depends upon it for every sort of work. Also, due to contract with outscoring company, outsourcer cannot revoke the contract without giving any prior notice to them. This certainly affects the business outcome and can even results in poor market performance. Moreover, if there is deviation in the working hours of both companies that lack of communication may witness every now and then. Due to this, main motive of outsourcing doesn’t get achieved and hence high cost may incur to outsourcer.

Deviation in Service Quality

Further, risk of getting poor quality work is always paramount in outsourcing function. Company can witness such issue due to various set of features such as poor adapt to technology, lack of skilled staff, poor working condition, low work ethics and several other. Due to this, actual motive of outsourcing doesn’t get complete and hence it can result into decline in the business performance of outsourcer. Further, outsourced company many a time can be slow in responding to changes in business condition. This can lead to poor outcome through which competitive benefits can be attained by other companies. Moreover, due to poor service quality, wrong decision can be made based on information received from outsourced company. This can cost heavily to outsourcer and can also result into poor business strategies. To overcome such risk, it is required that company must assess the capabilities sand skills of outsourced company.