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Outsourcing: Advantages and Disadvantages

Paper Type: Free Essay Subject: Economics
Wordcount: 2234 words Published: 28th Nov 2017

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With the rapid rise of globalization, the challenge of global outsourcing today is not “Why outsource and what?” But “How to outsource?” Today’s theme is “Let’s get it right the first time.” Barriers to outsourcing companies are own mentalities, local regulations and the robustness of their internal processes. Domain knowledge in many industries has gone totally global.

Sri Lanka is becoming a global IT-BPO destination of choice in several key areas of focus domain. Sri Lanka ranked among the top 20 global destinations in outsourcing / BPO consulting giant AT Kearney

The growth of the IT-BPO industry in Colombo offers a unique advantage for Small and Medium Enterprises (SME) to enjoy premium access to a talent pool of high quality, which is becoming increasingly difficult in large established destinations such as India and China. The environment is also very suitable for the establishment of competence centers niche in high demand for companies competing largest global services.

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Sri Lanka can not be at the top of the countries involved in outsourcing of business processes, but it is increasingly preferred. Having learned from India’s success in this area is slowly opening up to many foreign companies that are opening operations in this country. Business Process Outsourcing in Sri Lanka has been aided by the fact that the country has opened a sales outsourcing partnership aimed at helping it to become a reference center for this business.

Business Outsourcing has been an important source of income for China and India for a long period of time, but the clock is fast becoming the business of Sri Lanka outsourcing. So what exactly does Sri Lanka quickly begin to grow in this sector? This is attributed to the fact that most sellers are looking for several locations for their business so they are turning to Sri Lanka


I intend to do a constructive criticism on the article ‘’Sri Lanka – Realizing the potential of Outsourcing” which is written by Dr Arul Sivagananathan with this assignment.The content will be included with definition, advantages and disadvantages, Sri lanka’s potential of outsourcing …etc.Also there will be a SWOT analysis to identify Strengths, Weaknesses, Opportunities and Threats of Sri Lanka as an offshore destination.


  1. What is offshore outsourcing
  2. Types of offshore outsourcing
  3. The Advantages and disadvantages of Outsourcing
  4. All Eyes Are Turning to Sri Lankan outsourcing
  5. SWOT Analysis of Sri Lanka as an offshore destination
  6. Conclusion
  7. References

What is offshore outsourcing?

Outsourcing is the practice of hiring an external organization to perform some business functions in a country other than that in which the goods or services are actually developed or manufactured. It can be contrasted with offshoring, in which the functions are performed in a foreign country by a foreign subsidiary. Opponents say the practice of sending work overseas by countries with higher wages reduces their own domestic employment and domestic investment. Many jobs customer service jobs as well as in the sectors of information technology (data processing, computer programming and technical support) in countries like the United States and the United Kingdom – have been or are potentially affected .

Types of offshore outsourcing

  • ITO — Information Technology Outsourcing
  • BPO — Business Process Outsourcing
  • Software R&D — offshore software development
  • KPO – Knowledge Process Outsourcing

The Advantages and Disadvantages of Outsourcing

The Advantages of Outsourcing

  • Speed and experience: Most of the time the tasks to providers that specialize in your field are outsourced. Outsourcing providers also have specific equipment and expertise, most of the times better than those in the organization of outsourcing. Indeed tasks can be completed faster and with better quality production
  • Focus on the main process instead of support: Outsourcing of support processes gives the organization more time to strengthen its core business process.
  • Risk allocation: one of the most important factors that determine the outcome of a campaign is risk analysis. The outsourcing of certain components of your business process helps the organization to change certain responsibilities outsourced provider. As the outsource provider is a specialist, who plan their mitigation factors better risks.
  • Reduced operating costs and contracting: The outsourcing avoids the need to recruit people in the house; therefore, the recruitment and operating costs can be minimized greatly. This is one of the main advantages of outsourcing.

The Disadvantages of Outsourcing

  • The risk of exposure of confidential data: When an organization outsources human resources, payroll and recruitment services, it is a risk if the exposure of confidential company information to a third party.
  • Synchronization of deliverables: If you do not choose a suitable partner for outsourcing, some of the common problem areas include extended delivery times, production of sub-standard quality and improper categorization of responsibilities. Sometimes it is easier to regulate these factors within an organization rather than an outsourcing partner.
  • Hidden costs: Although outsourcing most of the time is profitable, sometimes hidden costs involved in signing a contract while signing a contract through international borders can pose a serious threat.
  • Lack of customer care: A provider may subcontract basis of the knowledge-needs of multiple organizations at once. In such situations, the sellers may lack a comprehensive approach to the tasks of your organization.

All Eyes Are Turning to Sri Lankan outsourcing

Sri Lanka is becoming stable after the war, however, still has some problems that make it not as competitive as neighboring India. Top among them is that Sri Lanka lacks a good support infrastructure outsourcing.

The good infrastructure including a good network of roads and modern airports is greater openness to outsourcing business.

Sri Lanka also has recreational facilities such as beautiful beaches, rich history, among other things that makes it a leisure center and a business center.

The approach therefore leads the finance and accounting reasons why everyone wants outsource of Sri Lanka. There are so many companies that outsource in these two sectors.

Outsourcing in Sri Lanka is that it comes with several incentives, some of which are cheap labor with excellent work ethic.

Moreover, the time lag with the West, especially the U.S., where there is a difference of about 12 hours of information and services could be hired and work during the day, so it is cheaper.

Outsourcing in Sri Lanka will be more favorable than the country produces so many graduates as well as graduates who are unable to get jobs full time. These professionals could be subcontracted to do some work as web design and maintenance jobs blogs, as well as in relation to the data entry. Sellers who have such jobs will find Sri Lanka a place to be in.

Sri Lanka is also benefiting from outsourcing not only at sea, but of the many research and development that have been developed under the outsourcing business model. Like most Asian countries, Sri Lanka also offers cheap labor compared to developed Western industrial powers and therefore outsourcing in Sri Lanka comes with the best offers.

Besides that, subject to resources and lack of experience in the outsourcing business. These are the setbacks that the country needs to address quickly to reach the same level as their neighbors.

National development programs focus on competition to ensure that Sri Lanka becomes a center of excellence and has had attention in several areas. Some of these areas focused on include software services sector that throws its weight in the banking, telecommunications and insurance sector is definitely going to boost BPO companies in Sri Lanka and make them more competitive worldwide. In addition to the IT-BPO has already been identified by the government as a key force in the growth of subcontractors.

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Sri Lanka going to share some of the unique attributes that has made India stand out and is favored especially by the company outsourced offshore. These factors are the high level of literacy and specialty in the English language and Western legal model. This attracts many sellers from the west procedures found in Sri Lanka outsourcing easy so end up settling there.

To better promote outsourcing, Sri Lanka has created its own trade association, which aims Slasscom increasing competitiveness in the BPO business. In addition, Sri Lanka has more than seven telecom operators and an international connection through three submarine cables. Connects satellite, 3G, broadband and lease line are also available thereby increasing outsourcing of Sri Lanka especially in the IT BPO is one of the most developed in the affairs of Sri Lanka BPO.

SWOT Analysis of Sri Lanka as an offshore destination


  • High literacy rate
  • English speaking popuation in colombo
  • Availability of specific talent pool(e.g. largest pool of CIMA accountants outside the UK)
  • Investor friendly policies(tax concessions/BOI support)
  • Time zone advantage
  • International brands already established
  • low labour cost for highly educated work force


  • Infrastructure(lack of intelligent buildings developing road & transport systems)
  • Middle & senior management brain drain
  • Lack of English language skills outside Colombo
  • High bandwidth and electricity cost
  • Lack of 24/7 support for the industry such as transport and catering


  • Benefits to other industries
  • Brand Sri Lanka as a niche knowedge hub in IT/BPO
  • End of the civil war
  • Use the large Sri Lankan expat community to attract work


  • USA onshore operation scaling up at low cost
  • India and philippines already have a large market share
  • China and Brazil emerging as strong low cost players with English language skills


There are a lot of disparities in populations through various parts of the world with developed countries mostly have less population, especially in the Western world. In contrast, less developed countries have high population especially Asian countries. This has created the essence of offshore outsourcing in a company that operates in some particular countries hires another based company to give it a different labor and services needed country. Some of the key areas in which outsourcing is well developed include, finance, administration, payroll administration, customer service and so on.

The main reason a company prefer outsourcing is the aspect of cheap labor. Some countries such as India and China have huge populations and workmanship of this cheaply. This has led many companies, especially outsourcing of U.S. origin in these countries. This does not work alone, some of these countries have well developed business partnerships that have worked well to ensure that their countries are competitive and offer preferred subcontractors.

India is the largest recipient of outsourcing abroad, with a market share of almost 60% of the global volume. However, recently there have been several new arrivals as Sri Lanka and Malaysia Philippines.As outsourcing can become a major source of income for Sri Lanka we have to learn lessons from India.As and we identify the strengths, weaknesses, opportunities and threats accurately and pursue strategies to capture a significant market share in outsourcing.






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