Weighing the Value of Outsourcing

Since the 1980s, the term ‘outsourcing’ has become fixed in business jargon.  Outsourcing refers to the transference of duties or management to a third party, usually outside of the parent company’s country.  This is sometimes used synonymously with “off-shoring,” wherein a company opens another office in a foreign country to take advantage of a cheaper labor force or better tax situation.

I’m sure I’m not the only consumer who has routinely been at the end of a baffling and/or sometimes annoying phone call with companies who outsource.  I’m not saying that outsourcing is bad, but I think sometimes companies ignore the problems with outsourcing over the obvious advantages.

Advantages to Outsourcing

  1. Your support desk or QA team can work around the clock.  You can have people working a typical 9-to-5 in your home country, and with an outsourced team in Asia, for example, they will start work at the end of your day and end at the beginning.  Thus, work continues twenty-four hours a day.
  2. Outsourcing dramatically reduces cost.  Skilled labor in most countries where outsourcing occurs is a fraction of the cost of someone you might hire for your home office.  I recently spoke with a colleague whose job is being outsourced upon her departure from the company, and she said that the new person would be getting approximately USD 450 a month – a good salary in India – compared with her $50-60K per year.
  3. Outsourcing can allow you to focus on the more time-sensitive responsibilities.  One of the main uses for outsourcing is using a lower-cost labor force to perform the day-to-day, repetitive duties that previously had taken your eye off of the more important tasks at hand.  This is why using outsourcing for customer support is so popular.

Disadvantages to Outsourcing

  1. The language barrier can prove to be a huge obstacle.  I’m not saying that many of these outsourced folks aren’t fluent in English, because they are, but some outsourcing communities play down the other factors that are involved: strong accents and a lack of knowledge of American colloquialisms.  I recently placed a support call to a very popular CRM and had to repeat my problem three times.  The gentleman on the other end was very nice, but just couldn’t seem to ‘get’ what I was trying to say.  Or perhaps he did, but I couldn’t understand him when he spoke back to me.  Either way, this is not a good thing, and it’s happening more and more often.
  2. Outsourcing means a loss of control.  You will have managers at your outsourced location, who will do their best to follow and enforce the rules included within the outsourcing contract, but be aware that you run the risk of losing the proper management techniques that you have employed at your headquarters.  Because of this, productivity and quality of service can suffer.
  3. Communication becomes less cohesive.  The time difference means that duties may often take longer to do than if you had a full-time, in-house employee.  If the tasks being outsourced are HR- or website-related, you may find that it takes an extra day or more to get a simple task completed.  Similarly, if you have an urgent matter to attend to, calling the outsourced company in the middle of the day your time will get you nowhere, as it will be the middle of the night there.  There is also the matter of quality control, as it is much harder to explain a design concept, for example, in person than it is over the phone or via WebEx.

On a final note, one must also consider the social ramifications of offshore outsourcing.  In the 1980s, outsourcing was limited, for the most part, to manufacturing; that’s where the campaigns against cheap labor came in, especially in the case of children being used as workers.  Now, though, outsourcing has taken more of a high-tech route.  On the one hand, outsourcing creates jobs and opportunities in areas that otherwise might not have seen the economic growth that it has.  On the other, this does mean that well-educated, skilled American workers are finding it harder and harder to gain employment because so many technology jobs are being shipped overseas.  The Economic Policy Institute, a non-profit and (self-proclaimed) non-partisan organization, recently said that 18 percent of all jobs in California are susceptible to outsourcing.

One must also consider the current state of the world.  Before outsourcing to a specific country, do your research.  Ensure that the political climate is conducive to a safe, productive workplace.  The last thing you want is for communication to be completely cut off between your headquarters and your outsourced entity due to, say, a terrorist attack on the external country’s capital.  Don’t presume to think that this is a long shot; one major location for outsourcing is Pakistan, which has seen a steady increase in violence over the last year.

Is outsourcing right for you?  I can’t answer that.  I only ask that companies take a look at the big picture, instead of focusing solely on the allure of a cheaper workforce.

Categories: Career and Office

2 Comments so far:

  1. Sue Massey says:

    I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.

  2. Ingrid says:

    Thanks, Sue! Appreciate your visit. 🙂