What is Outsourcing and the Reasons for Outsourcing
Most of us are familiar of the term outsourcing. We are aware that this is one of the most common practices of the different companies today. Even the professionals are outsourcing different services. Most developing countries are enjoying this trend. This has provided employment to thousands of people in various countries.
However, this has also received various criticisms. This is because job opportunities shifted to the other countries. The locals are now having difficulty looking for a job because of this.
Outsourcing is an act of the organization that assigns tasks to another organization or group. It used to concentrate on information technology before. However, organizations have outsourced several other functions like travel assistance, customer service, transcriptions, and accounting.
Aside from providing cheaper labor force, there are other reasons why organization entrust some of their activities to a third party. Here are some of them:
1. It helps them find competent employees. The different industries are very competitive in almost all aspects, even in recruiting competent employees. With the aid of outsourcing, organizations are able to find qualified personnel without pirating them from other organizations. This saves them time, effort, and money.
2. It helps them focus on their core business. This is one of the best things that outsourcing can do. Since they assigned most of the management of the operation to another organization, they can now concentrate on plans for growth and development. They can keep an eye on new projects and campaigns. They can also respond to threats and opportunities right away.
3. They are able to find more use to their existing assets and resources. When an organization decides to outsource a portion of its operation, this does not mean that their current resources will go to waste. They can utilize their labor force to focus more on new campaigns. They can also manage their expenses and other costs well.
4. They can choose an organization or country that specializes on a particular task. This way they do not have to compromise the quality of the products or services. They can assign operations regarding technical stuff to centers in India. They can also look for the most competent agency in terms of providing web designs and systems.
5. They are able to share management of the operation without losing full control of it. This is what enables the organization to focus on the core business. Although they assigned the task to a third party, they will not lose control of the operation. They can monitor it occasionally. They can also demand for periodic reports if they want.
Many organizations are outsourcing most of their processes. This is because of cheaper labor forces in developing countries, mostly in Asia. They are also able to find a pool of competent workforce without spending a lot. As a result, they are able to manage their resources better and focus more on the growth of the business. The entire course leads to better management of expenses that results to cheaper goods.
Description: There are some casualties of outsourcing. The locals can no longer take advantage of the job opportunities provided by various organizations. However, most organizations find this necessary to manage their company better.
Advantages and Disadvantages Outsourcing happens when an organization enters into a contract that assigns a portion or an entire task to another organization. It can be domestic or foreign outsourcing. Domestic outsourcing takes place when an organization assigns the task to organizations at home. An example would be an organization doing business with a security agency to provide guards for their establishments.
Foreign outsourcing on the other hand assigns tasks overseas. Normally, big organizations do business with centers located in different parts of the world. India is probably the leading country in providing labor pool to first world countries. They specialized in information technology. The next in line is the Philippines. Although they cannot compete with India in terms of IT force, the country can provide several other services like accounting and finance, and customer services.
There are many reasons why organizations outsource their workforce. One is because of the availability of cheaper employment resource. This can greatly help them cut down on labor costs. Although employees overseas are no worse or better than those at home, they settle for a much lesser pay, less than what the employees from home would demand.
Another reason is that outsourced services are easier to manage. The organization becomes the client of the outsourced agency or business. They give their demands, thus the pressure and stress shift to the outsourced organizations. All the organization has to do is to communicate with the head of the outsourced organization, and in turn, they will discuss it with their work force.
The difficulty in finding qualified and competent human resources is another reason why organizations opt to outsource labor from neighboring states and overseas. Local employees demand for higher pays and they cannot assure to deliver the best output. On the contrary, organizations can negotiate the rates of labor expenses if they outsource it. Outsourced group also assures to deliver what the client requests.
Outsourcing has both positive and negative effects. Although this is good news to nations who have been recipients of outsourced tasks, job search has been tough to the locals of where the outsourcing organizations are from.
The locals are not in favor of foreign outsourcing. Why would they favor it if they feel that the other countries are taking away the jobs that could go to them? Here are some of the other negative effects of outsourcing:
1. The competition for finding a job for the locals is tougher. This is the most obvious effect of foreign outsourcing. Since more jobs are assigned in other countries, the natives will have more difficulty gaining employment.
2. Miscommunication is also another disadvantage of outsourcing services. Although trainings can correct this, there will always be instances of miscommunication. The client could mean one thing and the outsourced organization could interpret it in a different way. They largely depend on technology to transmit instructions as well. If something wrong will happen to the communication system, the entire operation will suffer.
3. Organizations do not have full control of the outsourced services. Several IT organizations provide employment opportunities in India. Because of this, technical support agents may not perform well since they can easily seek for employment in other organizations. Although the center can provide policies and targets for the agents, the organization will not have full control of the services they provide.
4. Confidential information could leak to competitors. This is not impossible since contact centers in different countries have various clients. A center can handle the services for two competing clients. Although this can be a major ethical issue, the business unit in charge of one client may deliberately or accidentally disclose valuable information to competitors. The other party may not know about it and may be surprised with the turnout of their revenue.
5. Outsourcing has also demoralized local employees. Imagine how you would feel if you witness your employer, slowly assigning tasks to other countries. Surely, you will feel that you could lose your job any time soon.
Although this is the case, outsourcing also offers several advantages. Most experts would say that this is a win-win situation for people at home and abroad. Here are some of the positive effects of outsourcing:
1. This gives more employment to developing countries. These countries offer several employment services. They can facilitate the building of needed infrastructures, train new employees, and process needed documents for the operation. This will do well for the entire economy of the developing countries.
2. Organization cuts down on labor expenses leading to cheaper products. The primary reason why organizations outsource labor force is that it is cheaper in other countries. When labor cost is low, they can adjust the prices of their goods. This in turn will give consumers more purchasing power.
3. Organization can concentrate on issues that are more important. Since the organization assigns the management of a certain department to a different organization, they will have more time to plan marketing strategies. They can also scout for other opportunities and might even come up with an expansion program. This will create more employment.
4. Organizations are able to establish good relationship with other countries. This is necessary in globalization. Since these are developing countries, they will surely find potential markets. It will be easier for organization to penetrate the market if they already have a background of how the culture is.
5. Productivity improves. Since labor is cheaper, the organization is able to provide more career opportunities. This results to more productivity and better services.
6. Organizations are able to compete better because the productivity increased and management can now focus on planning and coming up with strategies. They will have more time studying the trends and the actions taken by their competitors.
7. With outsourcing, organizations are able to save on other aspects of operations. They are able to use state of the art facilities and technologies at a much cheaper price.
As long as its disadvantages do not outweigh the benefits, outsourcing is a great business strategy.
Description: Although there are some negative effects of outsourcing, one cannot deny its positive contribution in the world. It provides employment. The organizations save on labor force as well. Most importantly, the prices of goods can go down, giving the consumers more purchasing power.
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