Outsourcing is a practice through which a company contracts a third-party to complete a project or process on their behalf. Outsourcing in business has always existed, but has grown more popular through the emergence of a global economy. The major benefits of outsourcing are lowered costs and skilled labor.
The Challenges of Outsourced Labor
Companies that seek to outsource their labor need to successfully manage their quality of service or the quality of the goods being produced, as they do not always have direct control over the process. Language barriers and cultural barriers may exist between the two companies, and security may become a major concern. When outsourcing, companies usually need to be extremely cautious about the qualifications of their outsourcers, especially when dealing with a rigid discipline such as engineering. There may also be specific government and international regulations at play.
The Reasoning Behind Outsourcing
Most companies outsource their operations as a way of reducing their overall costs. The company that they outsource to is usually highly specialized in its field, allowing it to complete the project in less time and with less overhead. Further, most companies outsource to countries or regions that have lower costs overall. Some companies may outsource their operations simply to reduce labor costs: outsourcing to an IT technician that works by hour can be much less expensive than maintaining an on-site IT team, especially when benefits and taxes come into play.
Global Effects of Outsourcing
Outsourcing has had a dramatic effect on the global economy. Many countries in which outsourcing has become popular has experienced economic growth due to the influx of money from outside their borders. However, not all outsourcing is considered offshoring: there are many companies that outsource their labor to companies that are within the same country. Only offshoring, the outsourcing of labor to another country, has impact on the global scale. Offshore outsourcing has been criticized as weakening the overall economy of many countries, most commonly the United States.
Recent Outsourcing Trends
Outsourcing has become less popular in recent years, and many companies have begun completing business processes internally rather than outsourcing. Many companies reported that the consequences of outsourcing were unpredictable, and others felt that the logistics and overhead of working with an outsourcing company somewhat mitigated the benefits.
Many companies have found that the quality of their products or services suffered significantly through outsourcing, and others have found that the positions that they were once outsourcing can now be automated successfully in-house. Further, the public opinion of outsourcing has also lowered substantially.