Evaluate the need for outsourcing and discuss its limitations.

Outsourcing or Business Process Outsourcing (BPO): 

Outsourcing is a management strategy by which an organisation contracts out its major non-core functions to specialized service providers with a view to benefit from their expertise, efficiency and cost effectiveness, and allow managers to concentrate on their core activities.

Merits of outsourcing: 

1. It provides an opportunity to the organisation to concentrate on areas in which it has core competency or strength. 

2. It helps better utilisation of its resources as the management can focus its attention on selected activities and attain higher efficiency.

3. It helps the organisation to get an expert and specialised service at competitive prices. It helps in improved service and reduction in costs. 

4. It facilitates inter-organisational knowledge sharing and collaborative learning. 

5. It enables expansion of business as resources saved from outsourcing can be used for expanding the production capacity and diversified products.

Limitations of outsourcing: 

1. It reduces confidentiality as outsourcing involves sharing a lot of information with others. 

2. It may be opposed by labour unions who feel threatened by possible reduction in their employment.

3. In the name of cost cutting, unlawful activities such as child labour, wage discrimination maybe encouraged in other countries. 

4. The organisation hiring others may face the problem of loss of managerial control because it is more difficult to manage outside service providers than managing one’s own employees. 

5. It causes unemployment in the home country.