Outsourcing and offshoring
Outsourcing is commonly known as the strategic use of outside resources to perform activities traditionally handled by internal staff and resources. Simply put, it is employing someone from the outside to do work for you. This ideology has been around for centuries. Ancient Egyptian civilizations recruited nearby civilizations for farming and construction. Outsourcing continued to rise in popularity as businesses and industries developed. In the 18th and 19th centuries during the industrial revolution, outsourcing was used, but businesses were limited due to lack of technology. Outsourcing typically stayed in the country of origin of the business. It was formally identified as a business strategy in 1989.
Today, outsourcing is found in just about every industry. For small businesses, outsourcing is sending jobs or tasks that the business does not specialize in elsewhere. The core competencies are for the actual business to handle; for example a cleaning business. Their core competency is cleaning obviously, but what about things like accounting, human resources, advertising? These are things that would probably be outsourced.
For some large businesses even the core competencies of the business are outsourced. Offshoring is outsourcing to a different country. This creates a lot of controversy because jobs are being lost in America and gained in foreign countries. Factory workers all the way up to college grads from India, Mexico, China, and the Phillipines will work for a fraction of the pay. Factory start up costs, materials, labor, and insurance are very expensive in America compared to other countries. For business owners outsourcing is an opportunity to cut costs and increase profits. Companies that do everything have an incredible cost to run, as opposed to others that outsource and have half the tasks. Outsourcing will increase the efficiency of the company by making their work more focused. Outsourcing will increase profits making the company an attractive investment. Smaller companies will be able to compete with large companies by hiring top level accounting and marketing teams which otherwise would be too expensive to hire in-house.
Outsourcing sounds like a great business strategy but there are many disadvantages a business owner or manager should consider. The major disadvantage is losing control of the company. Decisions are being made without the company's control. The outsourcing company may also be dealing with the companies closest competitors which could create a host of problems. Confidentiality of the company could be lost because of the legalities of foreign countries. A legal team would have to be hired to ensure confidentiality and to review all contracts. There will be a lot of lawyer fees involved. Hidden costs, not part of the contract can accumulate. There is no guarantee the outsourcing company will stay in business; they operate just like any other business. A couple poor decisions by the outsourcing company may have them closing shop. Also quality control could also be an issue.
Consumers benefit from outsourcing because of the lower cost to purchase. The consumer will not have to pick up the extra costs a company will have from doing everything in-house. The disadvantages to the consumer and American people will be loss of jobs. The United States loses about 230,000 jobs a year due to outsourcing. Some argue that new jobs are not being created that rapidly. This problem stimulates ethical issues. Is it ok for Americans to lose their job because someone else from another country will do it cheaper? Should the education system teach computer programming if all jobs involved with that skill are found overseas? The answers to the questions are not black and white. The Companies argument will be they are forced into outsourcing to stay competitive, if they did not outsource the company would not survive and would lead to even more jobs lost.
I believe outsourcing has its place in business but should not be abused. When and what to outsource can be very complicated. Ethically speaking, if a job can be done in-house close to the outsourced price it should be kept in-house. If implemented correctly minimal jobs will be lost and maximum profits and benefits will obtained.
Today, outsourcing is found in just about every industry. For small businesses, outsourcing is sending jobs or tasks that the business does not specialize in elsewhere. The core competencies are for the actual business to handle; for example a cleaning business. Their core competency is cleaning obviously, but what about things like accounting, human resources, advertising? These are things that would probably be outsourced.
For some large businesses even the core competencies of the business are outsourced. Offshoring is outsourcing to a different country. This creates a lot of controversy because jobs are being lost in America and gained in foreign countries. Factory workers all the way up to college grads from India, Mexico, China, and the Phillipines will work for a fraction of the pay. Factory start up costs, materials, labor, and insurance are very expensive in America compared to other countries. For business owners outsourcing is an opportunity to cut costs and increase profits. Companies that do everything have an incredible cost to run, as opposed to others that outsource and have half the tasks. Outsourcing will increase the efficiency of the company by making their work more focused. Outsourcing will increase profits making the company an attractive investment. Smaller companies will be able to compete with large companies by hiring top level accounting and marketing teams which otherwise would be too expensive to hire in-house.
Outsourcing sounds like a great business strategy but there are many disadvantages a business owner or manager should consider. The major disadvantage is losing control of the company. Decisions are being made without the company's control. The outsourcing company may also be dealing with the companies closest competitors which could create a host of problems. Confidentiality of the company could be lost because of the legalities of foreign countries. A legal team would have to be hired to ensure confidentiality and to review all contracts. There will be a lot of lawyer fees involved. Hidden costs, not part of the contract can accumulate. There is no guarantee the outsourcing company will stay in business; they operate just like any other business. A couple poor decisions by the outsourcing company may have them closing shop. Also quality control could also be an issue.
Consumers benefit from outsourcing because of the lower cost to purchase. The consumer will not have to pick up the extra costs a company will have from doing everything in-house. The disadvantages to the consumer and American people will be loss of jobs. The United States loses about 230,000 jobs a year due to outsourcing. Some argue that new jobs are not being created that rapidly. This problem stimulates ethical issues. Is it ok for Americans to lose their job because someone else from another country will do it cheaper? Should the education system teach computer programming if all jobs involved with that skill are found overseas? The answers to the questions are not black and white. The Companies argument will be they are forced into outsourcing to stay competitive, if they did not outsource the company would not survive and would lead to even more jobs lost.
I believe outsourcing has its place in business but should not be abused. When and what to outsource can be very complicated. Ethically speaking, if a job can be done in-house close to the outsourced price it should be kept in-house. If implemented correctly minimal jobs will be lost and maximum profits and benefits will obtained.
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