One of the big advantages to outsourcing is flexibility--it can be a lot easier to cut back on a vendor than an employee. (Think of how you would feel if you had to tell an employee who is dependent on their job that you only need them half-time now.) Another advantage is that you don't have to become an expert in every particular area--you can depend on the outsourced company to be the expert.

Perhaps the most positive thing about outsourcing is its ability to save you money. This will, of course, depend on the size of your company and what specific tasks you outsource, but in general, if you think it through, you can save money. For example, my company outsources the IT services (help desk, computer support and maintenance), and we pay significantly less than we'd pay for a full-time IT person to give us the same level of support. We also outsource our bookkeeping and office administration, with similar savings. As we grow, we'll continue to reevaluate these decisions--it may be that the business case for the IT outsourcing remains good as we grow but that we might eventually hire someone to offload other work from our current people, and since we would be paying them anyway, we could get them to do the bookkeeping as well.

There are some definite advantages to outsourcing. Contract work is often cheaper--especially if you opt for off-shore development. You hire people only for specific tasks. You can keep adjusting the size of your team to fit your current needs and budget.

Outsourcing creates shareholder value by reducing costs and commitments to fixed and working capital ... Secondly, outsourcing helps a company focus on its core business, creating a competitive advantage within its industry. Other advantages include gaining access to best-of-class capabilities and accelerating the benefits of re-engineering."

Another advantage outsourcing gives corporations is a chance to get the best job possible from the people it hires.  By using a third party, a company has more room to be critical of the kind of services provided. If the work is done in-house, there may be company ties which are hard to break.