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Cost of Outsourcing

Though outsourcing is known to reduce costs, there are costs that are involved in outsourcing business processes. These costs cannot be ignored as they are a part of the investment companies are willing to make to generate higher profits in the future. They would generally include the following:

  • Costs in the process of vendor selection ( legal, research time, traveling)
  • Training costs ( to train employees to deliver the agreed performance levels)
  • Client Retention ( Customers who may leave as a result of outsourcing or changes in service levels)
  • Brand management ( maintaining the sanctity of the companies brand image even if the processes are outsourced to far off locations)
  • Legal Costs (In case lay offs have been done to outsource processes. There may be legal ramifications of the same)

Some of them are not even considered by companies before the outsourcing decision is made however such costs may have a huge impact on the overall success of the outsourcing activity. Hence before you take the leap of faith, a comprehensive cost analysis is required. Just the savings in salaries and maintenance costs should not be the driver for a company to outsource its business.

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