Explain how the benefits of outsourcing are outweighed by its long-term costs

What will be an ideal response?

Outsourcing can appear too good to be true. Some of the benefits of outsourcing that are outweighed by its long-term costs are:
• High unit cost, forever—Although a fixed cost does indeed cap exposure, it also removes the benefits of economies of scale.
• Paying for someone else's mismanagement—An organization can find itself paying for another organization's mismanagement or may suffer the consequences of poor management, such as lost data.
• In time, outsource vendor is de facto sole source—The outsource vendor may change its pricing strategy over time. Initially, an organization obtains a competitive bid from several outsource vendors. However, as the winning vendor learns more about the business and as relationships develop between the organization's employees and those of the vendor, it becomes difficult for other firms to compete for subsequent contracts. The vendor becomes the de facto sole source and, with little competitive pressure, might increase its prices.