Effects of Outsourcing
The Outsourcing market is estimated to grow tremendously in the
coming few years with an increasing number of companies planning to
outsource both low-end and high-end jobs to offshore destinations.
Also the number of companies providing outsourcing services is on
the rise, thus resulting in larger variety. Due to the fact that
more and more companies are outsourcing, the risks are getting
smaller as businesses have more experience and clearer objectives.
Outsourcing in the world today is seen as a strategic management
option rather than just a cost cutting operation. It aids companies
to achieve their business objectives through operational excellence
and a better market position. In order for companies to focus on
their core competencies, all companies today outsource one or more
of their operations. In order to compete in the global economy
companies need to focus their resources on their core operations.
Lately however, the concept of outsourcing has been criticized. The
negative attitudes toward offshore outsourcing have been mostly
discussed by parties in the US and UK, due to job losses in the
mentioned countries. Some people in countries like the US, feel that
outsourcing is threat to their economy. Outsourcing jobs to offshore
destinations, is causing unemployment in the minds of some people.
On the other hand not only does outsourcing have benefits for the
company it also has positive implications or effects on a larger
level. Outsourcing will ensure that companies can pass the reduced
costs to national consumers or for investors to reinvest. New
revenues will be created as outsourcing to a foreign country will
establish demand for the company’s national products, especially in
high-tech products. Although some national jobs may be lost in the
outsourcing process, other jobs will then be filled generating
additional value for the economy.
Both negative and positive effects of outsourcing can be
recognized. Positive effects of outsourcing can include
concentration on core business areas, world-class technology at
lower rates, skilled manpower at affordable prices, increased
productivity, competitive advantage and tax benefits. Negative
effects of outsourcing can be decreased quality, increase in
time-to-market, poorer customer service, hidden costs, loss of
control, unreliable vendors and negative long-term effects on
business.
