Negative Aspects of Outsourcing
Effects on Companies
Besides the negative effects on the end user, companies themselves are beginning to approach outsourcing with greater skepticism. As an increasing number of services move overseas, the primary risk for corporations is the possibility of intellectual property violations. The strategic value, which is added by western companies, has a high likelihood of being misused by Indian firms. A study conducted by Deloitte found that 26 percent of its participants considered intellectual property issues as the leading cause for concern. These concerns are well founded – according to the same study, 10 percent of its participants had experienced some form of confidentiality violations.
Another significant fear is the prospect of being locked into multi-year contracts with a single vendor. A strategy, which has grown increasingly popular among software vendors, is to use proprietary programs to prevent their clients from terminating their contracts early. Outsourcing also leads to the situation where the work being performed by the BPO firms is completely abstracted from their client companies, creating a dire lack of transparency. Companies then have little control over their supply chain and find themselves in market competition with the same firms, which they had hired earlier to satisfy their outsourcing needs. In order to mitigate the effects of these factors, businesses have attempted to employ multiple vendors to diversify the application of resources and diminish the effect that any one company can have on it.
Generally speaking, outsourcing is a distraction for smaller companies 
since it requires substantial effort to first locate a reliable partner and then a significant amount of handholding throughout the entire development process. The nuisance of bringing a new partner up to speed on the development front, makes outsourcing viable only for large, well-established companies that have significant quantities of back-end processing, which can be easily taken care of without much supervision.