In addition to long-term strategic consequences, outsourcing also can raise some
concerns. For example, a company must turn over sensitive data to an external service provider and trust the provider to maintain security, confidentiality, and quality.
Also, before outsourcing, a company must carefully review issues relating to insurance, potential liability, licensing and information ownership, warranties, and disaster recovery.
Most important, a company considering outsourcing must realize that the solution
can be only as good as the outsourcing firm that provides the service. A dynamic economy can give rise to business failures and uncertainty about the future. In this climate, it
is especially important to review the history and financial condition of an outsourcing
firm before making a commitment.
Mergers and acquisitions also can affect outsourcing clients. For example, after their
merger, Compaq and Hewlett-Packard restructured and streamlined the products and
services offered by the new company. Even with large, financially healthy firms such as
these, a merger or acquisition can have some impact on clients and customers. If stability is important, an outsourcing client should consider these issues.
Outsourcing can be especially attractive to a company whose volume fluctuates
widely, such as a defense contractor. In other situations, a company might decide to outsource application development tasks to an IT consulting firm if the company lacks the
time or expertise to handle the work on its own. Outsourcing relieves a company of the
responsibility of adding IT staff in busy times and downsizing when the workload lightens. A major disadvantage of outsourcing is that it raises employee concerns about job
security. Talented IT people usually prefer positions where the firm is committed to inhouse IT development — if they do not feel secure, they might decide to work directly for
the service provider