Why are some people against outsourcing?Why do others support it?

There is some part of the population who is always against outsourcing while others think it is a great opportunity. Many believe that outsourcing increases unemployment rate while some believe it is a great way to increase employment rate in developing countries. For some people it is the pride in producing a product within a country while some people are happy to get the product made and shipped for a cheaper price.

Recently, growing number of politicians have continuously blamed North American unemployment rate on outsourcing.They believe that major companies should hire locally to help the country’s economy. There are some companies who support outsourcing because they make money on it.Most of the companies wouldn’t have been as successful as they are not if it wasn’t for outsourcing. The question lies whether or not companies would have benefited by hiring locally while some are unsure if outsourcing is ethical.

How Outsourcing effects the Global market?

Since the past ten years, we have seen the world emerging from just foreign trades to Globalizing IT, customer service etc. One would wonder how third world countries like India and China would play a major role in outsourcing. Generally, Third world countries are highly populated and have more educated people. Therefore, they have more people unemployed and those of who are ready to work for fewer incomes.

Third world Countries like India, Pakistan, Bangladesh whose second language is English has highly skilled people who are ready to work around the clock. However, North and South America has less population and more projects to be done for low budgets. It works out perfectly for either of the countries because one projects done while the other wants to have fewer unemployed people in the country and also to help grow the economy. India, after introducing outsourcing has grown economically.

Although China is not an English speaking country, it has a lot of resources and skilled people who need work. North America and UK on the other hand always have work to be done. Therefore, work is outsourced from First and Second world countries to third world countries. Mostly because it is economical for them.

To conclude, outsourcing has played a vital role over the years in the global market. If it was not for outsourcing, Third world countries would be challenged financially and economically.

Disadvantages of Outsourcing!

In my previous blog we have talked about the advantages of Outsourcing, Now I would like to share some disadvantages of Outsourcing.

Loss of Managerial Control: Once you sign a contract to have another company performing functions of an entire department or a single task, you are giving them authorization to make decisions. Hence; the company might feel a loss of managerial control.

Hidden Costs: You will sign a contract with the outsourcing company that will cover the details of the project costs. You will be entitles to pay anything that is not covered by the contract. Additionally, in some cases you will also be obliged to pay for legal fees. Just remember that it is the outsourcing companies that write the contracts for you.

Threat to Security and Confidentiality: With outsourcing there is always a risk of losing company’s secure information .If the contract involves sharing such confidential details that could be a major disadvantage and companies need to include penalty clauses in such cases.

Quality problems: The outsourcing company will be motivated by profit. Since the outsourcing fixes the problem by lower the expenses, they make the profit. But sometimes, you will lose the ability to respond the changes in the business environment.

Tied to Financial Well-being of Another Company: Since you have handed over operations of you are company, you are always keen on learning the well-being of outsourcing company.

Bad publicity: If you live in a community that has an outsourcing company and your friends and family are employees. If they lose their jobs, that is a bad reputation for the company.

Sources:
http://operationstech.about.com/od/outsourcing/tp/OutSrcDisadv.htm

Advantages of Outsourcing

Considering the fact that Outsourcing is playing a vital role in today’s business, which indirectly means that there are lot of advantages to Outsourcing. The following are the main advantages of Outsourcing

Focusing on Core activities: When a company grows, it means that each and every department of the company expands but some companies may not be able to focus on the back-office operations .Outsourcing those activities have made several companies successful without sacrificing quality.

Cost and Efficiency Savings: Some companies which are complicated in nature prevent them to perform some back-office functions .In such situations Outsourcing helps them cut operational costs.

Reduced Overhead: The Overhead costs of performing a particularly back-office function are extremely high, Outsourcing them reduced Overhead expenses.

Operational Control: When a company has too much work yet they have fewer employees, Outsourcing some work helps them control their project deadlines.

Staffing Flexibility: Outsourcing will allow seasonal or cyclical demands to bring extra resources when you need them

Continuity and Risk Management: Outsourcing provides the company a level of continuity while reducing the risk that a substandard level of operation would bring to the company.

Develop Internal Staff: Sometimes a particular project requires skills that the staffs of the company possess. On-site Outsourcing will bring people with the skills you need into your company while the staff gets benefited from

What is Outsourcing?Why do Companies Outsource?

Outsourcing is when one Company is contracting with another Company to provide services that might be performed by their employees itself but most of the times it is because of the financial advantages that come from it. For example Major Companies Outsource their Call centers, sometimes it is because of the reduction of work space and mostly it is because of the low expenses or cheap labor.

Ever wonder why a person with an Indian accent or an Australian accent serves you when you call a toll-free number that was displayed on the back of your Canadian bank card?Yes,Major banks from Canada have outsourced their Call centers to countries like India,China,Bangladesh etc. Other examples include major companies such as Wipro Outsource software projects to India. Mostly work is outsourced from developed countries to developing countries.

There are many reasons companies outsource various jobs, mostly because of financial advantage. Most of the Outsourcing services provide 24 hours service throughout the year which means services are more accessible and also reliable considering that there are lot of educated people in most of eastern countries .Companies could also focus on their development or other business issues while having small issues such as Call centres and payroll taken care of.