The main reason for outsourcing has obviously been economy. However, in the present day outsourcing companies are trying to make themselves more effective through segmentation and differentiation.

But cost benefits still remain the most important factor. Even the companies one outsources to are beset by higher real estate, labor and other costs. These provider markets are therefore hard pressed to reach their goals. So, how will things really shape
out?

In the case of costs, one must not forget transaction costs. One needs to consult lawyers and advisers and also needs to look out for lost productivity.In fact, it may ultimately be simpler, cheaper and more possible for a company to achieve the
success it desires at home rather than by outsourcing.

Many of the provider companies are facing labor concerns themselves which takes away from the cost benefits of outsourcing. Which is why it is not only the cost one needs to consider. Sure, you may not be able to find the workforce you are looking for. But this can be solved by hiring and training people in one’s own backyard.

It is not a simple job to develop a market rooted in capability. This is dependant upon reputation. Outsourcing is sometimes considered to be less effective because it is less expensive than the local services. This does not do much for the reputation of the outsourcing vendor.

Besides, positive customer contact and publicity required in the building of a good reputation for the company is missing in an outsourced endeavor.

But when all is said and done, just as the domestic companies are considering cost when attempting to trim their organizations and to make them more competent, outsourcing vendors will also still have to consider cost to be the most important factor than any other.