Pros and Cons of Outsourcing to Other Countries
The definition of outsource is to obtain goods or services from an outside supplier; to contract work. Outsourcing has been a stigma for years, but many people are starting to realize the benefits it provides. Although outsourcing is a controversial topic for many people, it does not only help businesses, but the economy as well. Many people deem outsourcing as a negative thing, because of the growing unemployment rate; however, there are many advantages for businesses to take this path. As James Bucki, former D106 Guide said, "When done for the right reasons, outsourcing will actually help your company grow and save money". Like any other business choice, there are pros and cons when the decision is made. Outsourcing is no different from any other business decisions; it appears that outsourcing jobs to foreign countries has both positives and negative affects when it comes to the business, economy, and the world as a whole.
"There's no reason we should do it all," he says. "We do what we're best at - and have other firms handle the rest." Paul Carpenter gave this statement to, CNN writer, Mina Kimes. This describes how outsourcing is not used just to save money, but it also helps businesses to focus on the areas it excels in. Many companies choose this route, because it allows the business to focus on their core activities. For example, as the business grows, administration tasks will also grow. In order to manage the back-office operations and administrative jobs time is taken out of the organization. When a company outsources it allows the companies to focus on their core competencies, instead of their non-core functions. An example of non-core functions could be managing bottle production instead of creating a new drink. (Assuming the company is known to produce new drinks.) Because the companies are able to focus on their core abilities this gives the company more time to grow and focus on new opportunities and innovations.
Another advantage of outsourcing is the cut of labor cost. Sopan Deb, Rocket Center reports that, " Labor was cheaper for American companies – less than $1 per hour according to the BCG report. ". With this said, it is evident that corporations can save a substantial amount of money on labor if it decides to outsource. This permits companies to work around the clock to create products and provide technical support. Because operations can now run for 24 hours a day, 7 days a week this reduces the amount of time to complete work or a project the firm is working on. Again, this allows companies to expand and grow when they no longer have to worry about spending an extensive amount of money on labor. When companies use labor in other parts of the world, it allows companies to focus and increase their skills onto networking in the competitive international markets.
Although outsourcing has many advantages, companies cannot ignore the disadvantages that come along with outsourcing. When a business decides to outsource the firm is essentially handing over the management and control of that function to another company. The business may be in a contract, but the managerial rights now belong with another company. As mentioned in the article by James Bucki, former About.com Guide, "Your outsourcing company will not be driven by the same standards and mission that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours." With this being said, if something goes wrong it will be very difficult for the firm to tell the outsourced company what to do. As mentioned in the article, " Offshore Outsourcing: Current and Future Effects on American IT Industry", by Laura L. Pfannenstein and Ray J. Tsai "Loss of organizational performance. Off- shoring weakens the already fragile relationships between employees and employers. Continued job loss will affect a company's ability to perform efficiently because they will be spending a lot of time dealing with people issues." Now that the managements have less say on what the employees should do, the performance of the employees could largely affect how consumers view the company.
Another disadvantage about outsourcing is the concern Americans have with it. Many Americans believe that companies should not be outsourcing to other countries with the increase of unemployment rates. As James Bucki, mentioned in his article," ...outsourcing will bring bad publicity". Many people are angry with companies that choose to outsource; therefore, the customers probably will not purchase the company's product or use the service. Along, with that many college students are concern about the lack of jobs that are available when he or she graduates. For example, in the article, " The Overlooked Effects of Outsourcing", Brian Marquez, mentions the fear of outsourcing fearing the students from going into certain fields. "The fear of outsourcing is striking a chord with America's future employees. Recently, the education system has seen shifts in college enrollment, as college students have begun to shun high-tech fields like computer science. Enrollment in undergraduate computer science courses dropped 19%, and the number of newly declared majors has dropped 23% since last year, according to the Computing Research Association (Schoenberger). The problem has become so bad that Bill Gates personally went on a tour of major university campuses in February 2004 to encourage students to continue with their computer-related majors". Because of this companies might get a bad reputation for outsourcing; and also, get the blame for discouraging the college students from going in certain majors.
It is safe to say that outsourcing has both positive and negative effects. Whether one company is for or against the use of outsourcing, it is not going anywhere. Outsourcing will continue to grow. Each and every year the use of offshoring jobs will increase tremendously. As long as the company feels it is the right choice to outsource and they are doing it for the right reasons outsourcing will be a great advantage to the company. Businesses must weigh out the pros and cons of outsourcing and see if it is right for them.
Kharif, Olga. "The Hidden Costs of IT Outsourcing." Business Week Online. 27 Oct. 2003. Lexis-Nexis Academic. News. University of Southern California Library, Los Angeles. 28 Mar. 2004. http://www.lexis-nexis.com
Marquez, B. (2006). http://www.usc.edu/org. In The Overlooked Effects of Outsourcing. Retrieved November 11, 2011, from http://www.usc.edu/org/InsightBusiness/archives/spring2005/outsourcing.htm.
James Bucki, "Top 6 Outsourcing Disadvantages: Outsourcing Disadvantages: Reasons That Outsourcing is Bad for Your Company." Retrieved on April 10th, 2012, from http://operationstech.D106/od/outsourcing/tp/OutSrcDisadv.htm
James Bucki,"Top 7 Outsourcing Advantages:Outsourcing Advantages: A Back-Office Operations Illustration." Retrieved on April 10th, 2012, from http://operationstech.D106/od/officestaffingandmanagem/a/OutSrcAdvantg.htm
"There's no reason we should do it all," he says. "We do what we're best at - and have other firms handle the rest." Paul Carpenter gave this statement to, CNN writer, Mina Kimes. This describes how outsourcing is not used just to save money, but it also helps businesses to focus on the areas it excels in. Many companies choose this route, because it allows the business to focus on their core activities. For example, as the business grows, administration tasks will also grow. In order to manage the back-office operations and administrative jobs time is taken out of the organization. When a company outsources it allows the companies to focus on their core competencies, instead of their non-core functions. An example of non-core functions could be managing bottle production instead of creating a new drink. (Assuming the company is known to produce new drinks.) Because the companies are able to focus on their core abilities this gives the company more time to grow and focus on new opportunities and innovations.
Another advantage of outsourcing is the cut of labor cost. Sopan Deb, Rocket Center reports that, " Labor was cheaper for American companies – less than $1 per hour according to the BCG report. ". With this said, it is evident that corporations can save a substantial amount of money on labor if it decides to outsource. This permits companies to work around the clock to create products and provide technical support. Because operations can now run for 24 hours a day, 7 days a week this reduces the amount of time to complete work or a project the firm is working on. Again, this allows companies to expand and grow when they no longer have to worry about spending an extensive amount of money on labor. When companies use labor in other parts of the world, it allows companies to focus and increase their skills onto networking in the competitive international markets.
Although outsourcing has many advantages, companies cannot ignore the disadvantages that come along with outsourcing. When a business decides to outsource the firm is essentially handing over the management and control of that function to another company. The business may be in a contract, but the managerial rights now belong with another company. As mentioned in the article by James Bucki, former About.com Guide, "Your outsourcing company will not be driven by the same standards and mission that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours." With this being said, if something goes wrong it will be very difficult for the firm to tell the outsourced company what to do. As mentioned in the article, " Offshore Outsourcing: Current and Future Effects on American IT Industry", by Laura L. Pfannenstein and Ray J. Tsai "Loss of organizational performance. Off- shoring weakens the already fragile relationships between employees and employers. Continued job loss will affect a company's ability to perform efficiently because they will be spending a lot of time dealing with people issues." Now that the managements have less say on what the employees should do, the performance of the employees could largely affect how consumers view the company.
Another disadvantage about outsourcing is the concern Americans have with it. Many Americans believe that companies should not be outsourcing to other countries with the increase of unemployment rates. As James Bucki, mentioned in his article," ...outsourcing will bring bad publicity". Many people are angry with companies that choose to outsource; therefore, the customers probably will not purchase the company's product or use the service. Along, with that many college students are concern about the lack of jobs that are available when he or she graduates. For example, in the article, " The Overlooked Effects of Outsourcing", Brian Marquez, mentions the fear of outsourcing fearing the students from going into certain fields. "The fear of outsourcing is striking a chord with America's future employees. Recently, the education system has seen shifts in college enrollment, as college students have begun to shun high-tech fields like computer science. Enrollment in undergraduate computer science courses dropped 19%, and the number of newly declared majors has dropped 23% since last year, according to the Computing Research Association (Schoenberger). The problem has become so bad that Bill Gates personally went on a tour of major university campuses in February 2004 to encourage students to continue with their computer-related majors". Because of this companies might get a bad reputation for outsourcing; and also, get the blame for discouraging the college students from going in certain majors.
It is safe to say that outsourcing has both positive and negative effects. Whether one company is for or against the use of outsourcing, it is not going anywhere. Outsourcing will continue to grow. Each and every year the use of offshoring jobs will increase tremendously. As long as the company feels it is the right choice to outsource and they are doing it for the right reasons outsourcing will be a great advantage to the company. Businesses must weigh out the pros and cons of outsourcing and see if it is right for them.
Kharif, Olga. "The Hidden Costs of IT Outsourcing." Business Week Online. 27 Oct. 2003. Lexis-Nexis Academic. News. University of Southern California Library, Los Angeles. 28 Mar. 2004. http://www.lexis-nexis.com
Marquez, B. (2006). http://www.usc.edu/org. In The Overlooked Effects of Outsourcing. Retrieved November 11, 2011, from http://www.usc.edu/org/InsightBusiness/archives/spring2005/outsourcing.htm.
James Bucki, "Top 6 Outsourcing Disadvantages: Outsourcing Disadvantages: Reasons That Outsourcing is Bad for Your Company." Retrieved on April 10th, 2012, from http://operationstech.D106/od/outsourcing/tp/OutSrcDisadv.htm
James Bucki,"Top 7 Outsourcing Advantages:Outsourcing Advantages: A Back-Office Operations Illustration." Retrieved on April 10th, 2012, from http://operationstech.D106/od/officestaffingandmanagem/a/OutSrcAdvantg.htm
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