The Pros and Cons of Outsourcing

The Pros and Cons of Outsourcing

Zurab Samushia
Dec 14, 2020

Introduction

Are you considering the thought of outsourcing jobs abroad? Do you know what outsourcing is, how it works, and where you can do it? Nowadays, it’s nothing new. Many companies, especially from the western hemisphere, outsource their work more than ever before. If you have been thinking about it, it might be because you’ve seen many others benefit from it. And why wouldn’t they? Today, employers can outsource software development, web design, advertising, copywriting, and a whole variety of diverse responsibilities, even customer support.

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.

Lower Costs

Not all companies are created equal. On the one hand, a company from silicon valley might have the economic leverage to afford to hire professionals straight from the local market. On the other hand, another company might lack the financial power to hire local professionals, especially in inflated markets. The reality is that, in a free market society, increasing your profit margin versus your costs is the primary goal. Otherwise, companies would not be trying to find innovative ways to increase profits. Now, it’s also true that every company has its reasons for outsourcing. However, it is pretty safe to say that “lower costs” is one crucial reason why companies outsource. Think about it. By outsourcing, you immediately lower your costs related to recruitment, training, hiring, managing, and other privileges such as housing. You may think that while seeking lower costs, you will sacrifice quality. On the contrary, outsourcing often gives you both high-quality and low prices. And if many are taking advantage of this, why won’t you?

You Get Access to a Larger Pool of Professionals and Skills

When it comes to hiring professionals, especially in IT, you may only have access to a limited talent pool. And if that’s all you got, then you will have to settle with what you find. However, outsourcing automatically gives you access to a worldwide talent pool that will cost you less and bring exceptional skills. For example, if you want access to talented and highly-skilled software developing professionals, outsourcing is the way to go.

No Need to Hire More Employees

In certain countries, usually post-developed countries, hiring employees can be costly. But when you opt for outsourcing, you can hire and pay the people who work for you as a contractor. This process gives you the benefit of not hiring any employees and saving the costs of training and providing benefits.

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.

Quality Problems

To be able to secure the quality you need, you must ask whomever you want to outsource your work to for samples of previous works. Many freelancing sites already provide this feature for their clients. Outsourcing agencies additionally provide examples, reviews, and success stories on their websites on the work they do. In any case, always check the level of quality before committing.

Communication Difficulties

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.

Feeling a Lack of Control

Even though you may be in charge when you outsource a task or a job, you might sometimes feel insecure about the level of control you have over the outsourced work. And you have a good reason to feel as such because you give up some control when you outsource. The person or agency you contract will not be working on-site. You will not be able to oversee every detail of what happens behind doors because you will most likely be thousands of miles away. In any case, there are methods nowadays to give companies a better sense of control over outsourcing. Some use timers; others might use cameras to record the process. If being in control is something you need to feel, you must discuss it with the agency or person you plan to contract.

A Shortage of Transparency

Transparency is an integral part of conducting business. As for outsourcing, the lack of transparency can be a problem. Companies that outsource would want to be aware of who, where, and how their products were made by the agency or person they contract. However, that could be challenging to monitor and investigate when you are on the other side of the globe. An agency you contract can theoretically subcontract another agency to do the same work for a lower price in unfavorable conditions. In the end, this is something that could end up hurting you, your business, and your reputation. Therefore, it is always better to know and research whom you are going to outsource work.

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.

Conclusion

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

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