Outsourcing: The Pros and Cons

BY LISA SELVAGGIO

Outsourcing is a somewhat controversial topic, with strong supporters on one side of the argument and opponents on the other. The main concern is that many jobs that could be kept within the country are given to people in other nations instead. So, in order to determine whether outsourcing is a good step for your business to take, you have to understand the pros and cons associated with doling out work to people outside of your company. 

Read also: Raising the Global Free Trade & Other Benefits of Business Globalization

outsourceOutsourcing Statistics

Outsourcing has grown in the last decade, and recent statistics show that more than two million jobs were outsourced in 2013, with many of those opportunities going to workers in China and India. 43% of the IT sector was outsourced, 26% of distribution is now taken care of offshore, 12% of call center jobs are found overseas, and 38% of research and development (R&D) is taken care of by workers outside of the country.

Reasons Why Businesses Prefer Outsourcing to Doing Business In-House

There are several benefits that can be derived from outsourcing certain aspects of your business to other individuals and companies, even if they’re as far away as halfway around the world. In 2013, a reduction in costs was the main reason businesses used offshore outsourcing, while gaining access to IT capabilities came in second.

Improved Efficiency

When it comes to doing business successfully, efficiency is key. After all, time is money, so one of the first things that students are taught in business school, and one of the first things that consultants will recommend, is efficiency. This essentially means that your company is able to produce a lot in the shortest amount of time while still maintaining the highest quality for your customers. It can be difficult to achieve efficiency, but once you have it, you’ll notice that your costs are reduced and your profits increase.

Outsourcing allows a company to become more efficient by giving work that can’t be accomplished in-house in a reasonable amount of time to those who are specialized in the field and have the tools to do it right and do it quickly. 53% of manufacturing companies take advantage of offshore outsourcing in order to improve efficiency while cutting costs.

Read Also: Have We Reached the End of Globalization?

It’s Not All About Reducing Costs

Reducing costs isn’t the only reason why outsourcing is so popular. Global business allows individuals to come together and work towards a common goal, and outsourcing lets companies tap into a large pool of talented workers from all over the planet.

It is important to note that outsourcing doesn’t always refer to offshore outsourcing. Instead, it can be done within a company’s own country. Freelancers and contractors, such as artists, writers, and IT professionals, can all be used whenever they’re needed without having to hire all of these individuals on a full-time basis. While a company may be able to reduce costs by outsourcing in this manner, it is more about the value of the work that is being done and the fact that the business’s own employees may not be as well equipped to handle these tasks as professionals who do it for a living.

A Global Economy and Lower Costs for Consumers

Supporters of outsourcing also claim that it helps improve the economy both at home as well as abroad. Countries that were previously struggling can now succeed in the marketplace because of companies who outsourced their needs to them. And when businesses are able to cut costs through outsourcing, they are then able to transfer those savings to the consumer, who enjoys paying less for the products they use every day, and this ultimately leads to a higher standard of living.

Problems Associated with Outsourcing

Even though businesses that outsource work will defend their choice, there are strong opponents to it who would prefer companies work with local professionals only or hire more employees in order to create more jobs.

Job Losses

When multinational companies started outsourcing their jobs, millions of people became unemployed as a result. Everything from manufacturing jobs to research and development (R&D) positions, IT services, customer service jobs, and distribution centers were lost when the largest companies began sending these jobs offshore. This left many employees looking for work and being forced to change career paths in order to be able to find employment again.

Finding the Balance

While a business sees outsourcing as a great opportunity to control or reduce costs, free up resources, gain access to talented professionals in a variety of fields, and become a global player, the other side of the coin is that jobs are lost and people are directly affected by this practice. And these facts should definitely be considered before you and your organization choose to outsource your work, especially if you’re planning on utilizing offshore talent. Weighing the pros and cons and considering the local economy and job market will help you reach the best, and most ethical, decision that works for both your profits and your community.
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