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Outsourcing: A Risky Business?

May 19, 2015

 

No matter whether the economy is in an up or down swing, finding ways to reduce your company's expenses is always in fashion. One of the fastest growing trends of the past two decades in business has been outsourcing. There is a low probability that you have not already been touched by outsourcing, but for the indoctrinated, outsourcing is nothing more than taking something you're doing inside your organization, and finding an external company that is willing to do the same thing, typically for less.

 

There are many ways to see the benefit of outsourcing, where it is done correctly. Some examples are:

  • reduced internal operating expenses

  • transferring operational risk

  • leveraging specialty expertise

  • leveraging the investments of the outsourcer

  • helping to accelerate the attainment of, or supporting business objective(s)

  • and more

In summary, outsourcing helps an organization to focus on its core business, while allowing others with specialized expertise and shared resources to enable the business and save on cost. So with all those benefits, why wouldn't every organization outsource everything it could? The truth of the matter is, sometimes things do go wrong. The root cause of why is the ultimate question. Unfortunately, there is no single answer for that, or we'd be able to mitigate the risk and be done with it.

 

More importantly why type of problem can outsourcers get an organization into. In the Ponemon Institute's 2013 Securing Outsourced Consumer Data report, it found that 64% of companies who outsourced experienced a data breach, and 64% say it happened more than once. To make matters worse 23% of vendors polled, could not tell how often data loss happened, which raises a red flag with regards the probability that they don't have controls in place to identify an incident. Of these vendors only 16% said they immediately notified their customers, while 25% responded that they simply don't tell clients about the data breaches.

 

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