Most companies start as a small business and do most
of the work themselves by taking on the responsibility for marketing, sales,
technology, and other components of the business. When the business grows, it
becomes more difficult for them to handle all of these tasks. At this point,
companies likely decide to hire someone from another company to do some of their
tasks for them in order to focus on the core business. This process is called
outsourcing: It's the practice of transferring any task, operation, job or
process that could be performed by employees within the company to a third
party.
Outsourcing has become a major trend over the past
decade. There are many reasons why companies decide to outsource. For instance, globalization results in many companies
competing in marketplaces making it difficult for them to retain a successful
competitor. Therefore, many companies decide to outsource parts of their
company in order to maintain competitive. Additionally, it is an easy
method for corporations to maximize their profit due to lower labor costs. Since labor remains one of the biggest
costs of the company, they have to pay an average wage and provide some health
benefits. However, outsourcing a part of the business can reduce labor costs significantly
since it gives companies the flexibility to employ workers when it is required.
Apart from the financial benefits, more and more companies, small and large,
turn to outsourcing as a way to grow since they can expand and gain access to
resources that are not available integrally. New market areas can also play a
role in the decision of outsourcing, for example, by taking the point of
production or service delivery closer to their end users.
In contrast, there are several reasons why companies
should not outsource parts of their business. Firstly, outsourcing means
dependence on other companies. The financial well-being of the company is tied
to the outsourcing company which can have a negative effect on the company. In
case the outsourcing company goes bankrupt, they would leave the company with a
huge problem. Additionally, outsourcing has many hidden costs, which can lead
to spending more money instead of saving it if terms and conditions are not clearly
defined. Furthermore, outsourcing leads to unemployment in their home country
since they can find lower paid workers who do the work for them. Moreover, outsourcing
provider may work with other customers as well and consequently might not give
full time and attention to a single company. This may result in delays and
imprecisions in the work output. Besides that, not understanding the culture of
the outsourcing company and the location where the company outsources can cause
communication problems and lower productivity.
A recent development among top global companies in
Europe and America is to outsource costumer support like call center services
to developing countries in Asia, especially to India. The reason why companies
settle down call center in India is due to the fact that India has a wide
variety of advantages that other countries do not offer. As the largest English
speaking population outside of US, India offers an excellent education system
providing more than a million high quality English speaking graduates every
year. Additionally, the Indian government has actively supported the call
center services industry by allowing duty free imports of capital goods and tax
exemptions. Moreover, it has invested billions of dollars for infrastructure
development in transport, communication systems, and broadband computing which
shows that Indian call center companies are highly adaptive to global trends.
Apart from that, the costs of employing, providing offices, training the worker,
and paying taxes can be quite high in their home country, whereas an outsourced
call center in a country like India can save up to 60 %. Furthermore,
outsourcing call centers help companies not only to improve the profit but also
to concentrate on core businesses and to become more productive.
Another of the most frequently outsourced business
tasks is manufacturing. For many similar reasons as the Indian call center
services, European and American manufacturing companies move their production
out of their country to China to save a significant amount of money. China is
more beneficial when it comes to manufacturing over other Asian countries. One
reason is the experience and education the country has in delivering products
that reach the standards that are required by both western legislation and
consumers. Additionally, Chinese labor is cheaper even though they provide the
same quality. Moreover, there are fewer regulations regarding labor conditions,
use and disposal of materials, which encourage companies to settle down their
productions factories in China.
In conclusion, outsourcing is an arrangement in
which work is done by people from outside a company, usually by a company that
is specialized in that type of work. It can have a positive but also a negative
impact on companies and society.
One the one side, outsourcing can have beneficial
impact on the company regarding money- and time saving. It can be really
effective to hire experts in some areas of the company and work close with them;
especially small businesses can benefit from this since it gives them access to
more knowledge and the opportunity to grow. Moreover, settling down companies
in foreign countries helps to build up other
countries' economies, such as China's and India's, and make the global economy
more stable, balanced and powerful. It
offers job opportunities and a higher living standard in developing countries.
Apart from that, our society can also profit from outsourcing. It gives
us the access to a wide range of high quality products at low prices.
However, there is another
side to the issue of outsourcing that needs to be considered. Not all people
benefit from outsourcing. Outsourcing can have negative impact on society such
as unemployment in western countries caused by the availability of cheaper
labor in Asia. Local workers are forced to find new jobs, which can lead to the
fact that they need to move to another community to find one. The reason why
our society gets so many high quality products at low prices is caused by the
abuses of foreign employers by not providing humane working conditions. Outsourced
work may be performed in sweatshop by children, or in bad working conditions. Additionally,
time zones and languages between the companies can be different, which makes it
difficult to work effectively since messages can be misleading. Moreover, outsourcing
has many hidden costs, which can end up in spending more money instead of
saving it.
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