Outsourcing has been growing worldwide. In 2016, a survey predicted steady growth in the use of outsourcing services across the globe. And up until now, this has been the case. Therefore, if it’s something you are considering to jump on, take a look at outsourcing’s pros and cons. Although outsourcing might be praised by many, it still has its problems. Nothing is perfect. But still, it is better to know beforehand what you are getting yourself into rather than finding out the hard way.
What is Outsourcing?
Outsourcing is an agreement of work between a company and an outside service provider. More specifically, one company hires the services of another company, consultant, freelance, or agency to work on or manage a task or job. Outsourcing usually involves the transfer of employees or assets from one company to another. An example of outsourcing is a restaurant chain having an entire phone app for its restaurant designed and produced by a tech company abroad.
The Pros of Outsourcing
Many people are interested in outsourcing. It has practically gone viral in the tech world. Many new startups and big firms are going with outsourcing for various reasons. With that said, get to know some of the perks of outsourcing yourself. You can decide if it’s for you or not. Here are some reasons as to why many are raving about the benefits of outsourcing.
It Contributes to the Economies of Developing Countries by Providing Jobs
One marvelous thing about outsourcing is that it creates an opportunity for people in less developed countries to make more money than otherwise. Many parts of the world are not as economically wealthy or fortunate as high-tech countries in North American and Europe. So when companies in wealthy countries decide to outsource, they automatically make people better off than they were. Take, for example, an American startup. That startup could outsource for a third of the cost of hiring in the U.S. This economic exchange benefits both parties in the outsourcing agreement. The American startup would save money from paying less. And the person doing the work from abroad would benefit from a higher salary.
The Cons of Outsourcing
After getting to know some of the benefits of outsourcing, you might begin to think that it’s a sweet deal. But, remember, nothing is perfect. And despite its benefits, there are some disadvantages. Here are some of the shortcomings that you should know.
In international business, the language barrier can be an issue. And even though most professionals around the world speak English, there will always be room for misunderstandings and misinterpretations. And in addition to that, the different time zones around the world can make it difficult for people to communicate. As a result, ineffective communication can be a potential drawback in outsourcing. Nonetheless, it shouldn’t stop you from establishing effective communication. When looking to outsource, always make sure to check with the following:
- The time zone the person or agency will be in
- Your favored method of communication
- If you can understand each other at a sufficient level.
Effective communication is vital in business, so it is worth keeping in mind when outsourcing.
The Loss of Local Jobs
An unfortunate outcome of outsourcing is the loss of jobs at home. If you were to hear anything negative about outsourcing, it would be that people are losing their jobs to cheap labor in other parts of the world. The media usually reports and sensationalizes this issue. However, while it is true that professionals at home are finding themselves without a job, many others abroad are enjoying better living standards due to outsourcing.
So in the end, Outsourcing has a generally positive effect on the global economy.
It helps to lower the costs for the customer and provides chances for people in developing countries to participate in the economy of stronger countries and get a piece of their wealth, without being obliged to physically move. This leaves these forward-minded individuals in their country of origin, where they can make use of both their knowledge and their income to help their native economy develop. In times of local recession, working for foreign companies also lowers the rate of unemployment and both the pressure of people to migrate for jobs and for the job-holding countries to help to build a living. In the end it will turn out that way that companies around the globe will all be working in different branches but on the same administrative level. So there will be fewer dependencies, but various clusters of companies and countries specializing in different professions.