In 2013, more than 2 million jobs were outsourced. A majority of these positions were given to workers in India and China. The IT sector is among one of the largest industries to experience outsourcing on a large scale. At a rate of 43% to be exact, this is closely followed by research and development (R&D), distribution, and call center positions. Outsourcing has gained popularity in terms of operating a global business, with many small to large businesses taking advantage of its many benefits.
Outsourcing has experienced its fair share of strong supporters and opponents making it a controversial issue to many. While it has harmed the American economy on various levels and enriched the financial profits of large corporations, paying less than $4 a hour is attractive to any company who is looking to reduce their overhead. However this can also make local production illogical, and lead to many loss jobs within the United States itself. A question faced by many businesses is, “Why pay more when you can have the same job done for less?” Unfortunately, outsourcing can also mean losing control of your business operation. To get a full understanding of this issue, here is a look at the biggest pros and cons of outsourcing jobs.
The Pros of Outsourcing Jobs
1. Higher Returns on Investment
Many believe that subcontracting is all about reducing costs, and it can definitely reach such a goal. But this method of doing business offers a lot more than this. When labor is cheaper, companies will be able to save money that they can transfer to their consumers. This can result in higher sales that will lead to better revenue realization. How long before you can see better ROI? A lot faster than if you were to tap into domestic talent that will cost you more.
2. Improved Efficiency
What is great about outsourcing is that you can choose a company or team that specializes in a particular skill set or knowledge. When subcontracting IT jobs, for example, you will be subcontracting IT-related tasks to specialists or experts, not just anyone who knows a thing or two about IT. There are plenty of companies that provide IT services performed by IT experts. With access to a pool of IT talents, you will be able to operate more efficiently. Moreover, you can tap a knowledge base for improved and better innovation.
In terms of manufacturing, you will be able to produce more in a short of amount of time, giving you an opportunity to meet increasing demands. After all, manufacturing firms are equipped with the tools, skills and knowledge to complete a task, which will save you from having to build your own assembly line.
3. Increased Speed of Delivery
With improved efficiency, delivery of products and services can be done quickly and more conveniently. But because tasks are done in another time zone and holiday schedule, business operations can still continue even if your office is closed due to a domestic holiday or because it is after office hours. This is especially true if the outsourcing companies operate 24/7.
4. More Management Time
When everything is done in-house, there is a huge possibility that some core competencies are not given as much attention as needed. But if you outsource activities that are routine, administrative or require specialized skills, you can focus more on core functions and ensure that your company thrives and succeeds.
5. Ease of Employment Handling
When things don’t go as planned, you have the option to cancel the contract or just fire an employee. No need to embroil in labor disputes or be in a dilemma of whether or not to let go of someone because you have formed a bond. With outsourcing, you can let go of anyone on the fly.
The Cons of Outsourcing Jobs
1. Loss of Control Over Business Processes
If outsourced personnel are working remotely, monitoring them could take time and effort. Even if there are apps and programs that you can use, there is no guarantee that an employee is doing the job right until you get the deliverables. What are the odds that your project is given adequate attention?
You should also be aware of the ‘4x Rule’ in the outsourced labor. That is, expect work to take four times longer to complete because of possible miscommunication, inaccuracies in implementation, etc. If work is done in-house, monitoring would be consistent and corrections can be done right away.
2. Concerns on Privacy and Intellectual Property (IP)
There are rules and regulations about IP and privacy in the U.S., which are respected and followed by domestic business owners, heads and employees. But if you employ people overseas or beyond the borders, you are practically leaving yourself unprotected. What are the odds that someone would copy your product idea or software codes?
Unless the country you are outsourcing to has similar rules in place, you can’t take legal action. So think long and hard before you outsource anything that involves sensitive data or trade secrets.
3. Quality and Turnaround Time Issues
Remember the ‘4x Rule’? This means, delivery of products would take longer, requiring you to create a schedule where the time gap is reduced if not eliminated. There are also concerns on product quality, especially on the kind of materials used. Products in China, for instance, have been involved in many controversies. Even if tags are changed into something else, the knowledge that they are produced in China can also diminish the trust that consumers have on the items and the company as well.
4. Job Loss
As previously mentioned, outsourcing jobs can mean higher domestic unemployment rate. Some businesses also take advantage by offering work at a rate that is lower than minimum. If they can get away with it, that is. Basically, what is beneficial to one country could spell bad news to another, where outsourcing is concerned. This is why there is a need to find balance in the local economy without costing your company huge overheads.
Outsourcing is both a boon and a bane, depending on who you are asking. Most companies and contractors see them as advantageous, but there is still a need to determine if the method will really work for a business. Are you willing to sacrifice one thing to achieve another?