Outsourcing is a business practice in which a company hires a third-party to perform tasks,
handle operations or provide services for a company. (Tech) Offshore Outsourcing is
when an organization recruits a third-party supplier to conduct operations from an outside
country. Outsourcing and offshore outsourcing are trending and increasing at 20 to 25%
annually for many different reasons, such as customer service, IT, payroll, account
payable or production of goods.
There are many benefits and risk associated with outsourcing whether onshore, nearshore,
or offshore. Many companies outsource to be more efficient, complete task quickly, the
skill set, or expertise needed for a job not available in-house and to lower costs. Having
such benefits, a company can focus more on core competencies and business and or utilize
the cost savings on new projects or current projects that may a higher yield in comparison
to the function outsourced. The risk associated with offshore outsourcing, a company
must stay in constant contact with the third-party and manage the relationship to ensure
success. A company can lose control over the function outsourced. Or have difficulty
acquiring all data needed if the function or outsourcing needs to be reversed. A company
should always have an exit plan in place. Another potential risk is security or the
improper handling of confidential and private data. No process in place to protect data
with encryption, proper employee training or controlled access. A company must hold the
offshore third-party provider at a high standard when it come to safeguarding their client’s
information or other data. The breach or leak of such information can weaken a
company’s reputation.
A company’s duty and responsibility in protecting to the best of its ability should be a high
priority whether the function is being handled in-house or outsourced. This could save
company millions or even billions of dollars in lawsuits. If offshore outsourcing is
utilized, the company should make sure the provider operates in good faith as if the
company were providing the service. a The provider should use every avenue available to
protect the clients data, data masking, data loss prevention software and encryption to
name a few.
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2020). Accounting
Information Systems (15th ed.). Pearson Education (US).
Outsourcing: Retrieved Dec 8, 2022.
https://www.techtarget.com/searchcio/definition/outsourcing#:~:text=Outsourcing%20is%
20a%20business%20practice,provide%20services%20for%20the%20company.
