Imagine having coffee, eating breakfast – while someone from the other side of the world is editing web content for you… and that it’s past dinnertime where that person is right now. That’s a basic picture of how outsourcing works.
Outsourcing has become something of a staple move for companies around the world – especially those in the U.S.
What is Outsourcing by the Way?
Outsourcing is contracting out or farming out of business processes to an outside entity. It may mean offshore hiring. More often than not, outsourcing involves sourcing out tasks abroad. It’s either an individual or a company contracting another company or agency, or an individual or a company contracting an individual. Get someone from another country to type documents for you, or even sketch your book cover art.
Before outsourcing , there must be a clear contract or agreement between the two parties.
What are Jobs That Can be Outsourced?
Although some of what we call outsourcing hotspots aren’t ready to take on very technical tasks, anything is possible in outsourcing. The menu is full of options such as:
- Data Entry
- Article Writing
- Web Design
- Graphic Design
- Web Content Management
Why Do Businesses Outsource?
It can be they don’t have the manpower at home to do the job, or oftentimes – as in big companies – to save money and resources (on taxes, energy, employees’ pay, benefits, and other operations expenses).
It’s also possible that businesses outsource because they don’t have the materials, the equipment, or that it’s simply more feasible for the job to be done on hot soil, where the target market for the products or services is based.
Who Can Outsource?
The hiring party could be a big or small company, or even an individual running his or her business from home.
Think of it as ordering food. You don’t have time to cook, or you simply want to save energy. So you pay for someone to cook for you, and the food is delivered at your doorstep just in time.
Just How Big is the Outsourcing Industry?
Outsourcing has become a regular fare for many companies, including the likes of Dell, IBM, and Expedia.
It’s not only big; it’s huge, humongous. That’s more than a little slice of the labor pie in known outsourcing countries like India and the Philippines.
According to Gartner, Inc., worldwide spending for outsourcing in the IT industry is poised to reach $251.7 billion in 2012 from $246.6 billion in 2011.
Other than for reasons pertaining to cost, time, and resources, outsourcing thrives because advances in technology have made it possible. The internet and telecommunication lines have given people tools essential for establishing and maintaining working relationships across the miles such as:
- Instant Messaging
- Social Media
- Webinar and Video Conference Tools
Over a century ago, working and collaborating with somebody across the ocean in real time was unimaginable. Doing business with somebody from a faraway land involved waiting for the ship to come – and it could mean waiting for a month for the ship to come.
What are the Possible Risks and Drawbacks in Outsourcing?
Just like any venture in business, there’s always a sort of a gamble involved. You can never remove risk and the possibility of failure or disadvantages in everything you put your hands on to work.
- Privacy, Confidentiality, and Security Concerns
If somebody from the other side of the world knows my password and all, does it mean they hold my life in their hands? There are cases of disappearing outsourced employees. Check out the background of the outsourced agency/company, the workers, and everything there is to know. You can’t say your business failed because you neglected to double-check things.
- No Direct Communication
There are some things, instructions for instance, that are best relayed to the person face-to-face. And also, working together in each other’s presence helps create a sense of professional camaraderie and a community spirit.
For example purposes, you can’t bark orders.
- Language and Culture Barrier
There are certain jobs in which accent is critical – such as those in customer service.
A thick accent can have a significant impact on the quality of transaction communication or may lead to misunderstanding. For instance, think of irate customers calling their airline and demanding to talk to reps who speak with an American accent. It happens.
Some countries have different spelling for certain words, or there are nuances in a certain region’s use of the language which someone from another place might find not easy to crack. Think chips for fries.
With that said however, we should celebrate cultural diversity.
It’s quite hard to work with somebody in a different timezone. Just when you’re tired and ready to call it a day, they’re just waking up.
- Lack of Complete Control
You don’t have complete control of the situation on the other side. When serious problems arise, you can’t just dive into the matter right there and then. Rousing you out of bed at night so you can discuss solutions long-distance will always be second to having you roll up your sleeves and get to work hands-on the same hour the problem erupts.
- Jobs Eating Jobs
Although we can never determine the exact number of jobs outsourced or moved offshore, outsourcing has become controversial in this aspect.
Because companies seek cheaper labor cost overseas, that can mean taking away jobs from people in the home country – like what’s happening in America and which is viewed of generally as unhealthy for the economy.
On the flipside, Michael Tanner of think-tank Cato, opines that “outsourcing can be generally good for America” because “economic prosperity is not about creating jobs but creating prosperity” when we shift our focus from creating jobs to creating wealth.
What are the Advantages of Outsourcing?
- Cost Reduction
As mentioned, primarily businesses outsource to save on operations expenses. But this isn’t to say it’s the whole truth.
- Precious Time in Your Hands
When you’ve hired or contracted others to work for you, you have time to relax (?) or focus on other things pertaining to your business. – although going to the beach won’t hurt. To put it more appropriately, you have time to think of other things, business or personal.
- Reduced Need for Infrastructure
This is especially true for online companies, which can function even without a formal physical office. Meanwhile, multinationals that do outsourcing can build plants, factories, or rent office spaces offshore.
What are Some of the Best Outsourcing Countries?
According to a report by Bloomberg Businessweek, top outsourcing countries include:
India, Canada, Australia, New Zealand, Singapore, Ireland, Israel, and the Philippines
Companies are looking to Asia with its pool of talented workers at competitive pricing. India – specifically Bangalore – is a hotspot for IT professionals. Philippines – with its close cultural ties with the US (having been a colony of) – thrives in the call-center industry.
Is Outsourcing a Smart Move?
With these issues about cost cuts and competitive pricing, is outsourcing really hiring on a shoestring budget? I say not necessarily. Some companies have the money and the budget; they just don’t want to spend a lot.
Outsourcing as a smart move for companies pretty much invites mixed comments. There are some disadvantages to it as there are advantages.
You can’t tick all the boxes.