Advantages of Outsourcing

Often, business owners work hard to integrate the various aspects of their operations and manage everything themselves, but this is not always the case. Some tasks are more compatible with an external partner in terms of scheduling and skillset. These tasks can include business administration, payroll processing, data analysis, market research and customer service. Seeking out a partner to help handle these responsibilities enables businesses to focus on what they are best at doing while also saving time and money that would otherwise be allocated for in-house staffing.

The post will explore some of the benefits of outsourcing from both a management perspective as well as those felt by employees who have been outsourced. It will look at the advantages of outsourcing from a business sense as well as from a worker's view, specifically how to minimize the risks associated with hiring an outsider.

Managers can quickly see the benefits of outsourcing and no longer need to work on every aspect of their company. This is especially beneficial for those in leadership positions, since they must spend time juggling multiple projects and angles. They can also focus on short-term goals and other strategic plans. One downside to this is that it may divert management away from other aspects of the business that are not being outsourced. There are also potential legal issues; this is especially true in cases where outsourced functions take over roles that were previously overseen by managers or owners.

For employees, there are a number of reasons to consider outsourcing that range from financial to personal. Traditionally, employees get a higher stipend for working at larger businesses. They also may benefit from the sense of being a part of a bigger success story and the opportunity to feel confident with their job security. Over the course of time, often this confidence wanes as managers are removed and replaced, which can lead to resentment among workers. Additionally, some jobs do not require a college degree and might be more appealing for those looking to work outside the home or those who wish to further their education in order to gain additional skills.

There are many different factors that are involved in outsourcing and it is important to recognize that there is no one-size-fits-all solution. Employees must identify the benefits of moving to an outsource position versus a job on the inside. They must also consider what kind of knowledge and skills they will be acquiring over time as well as which tasks and responsibilities seem more suited for hiring another company's employee versus handling it themselves. Outsourcing may seem appealing initially, but generally, employees must weigh all of these pros and cons before making their final decision.

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The article states "Outsourcing is voluntary—unless you're part of President Obama's health care reform law under Washington's new mandates. Workers must be given the ability to leave their employers when they want. The Affordable Care Act makes outsourcing mandatory for some businesses . . . ."

However, the article claims outsourced employees will have a better quality of life, as opposed to the "pathetic wages" received by those still working in-house.

The article suggests that "Outsourcing is a desirable way for companies to save money without reducing jobs." However, it does not mention any practical examples of outsourcing saving money.

In addition, the article goes into detail on how outsourcing jobs can help build up a company's reputation. For example, it states: "Many outsourcing companies are insulated from public scrutiny because they are separate entities. They get the work done and go back to running their other businesses." It also claims: "Outsourcing has become part of business as usual at many firms."

The article concludes with the following statement: "While outsourcing may be a controversial issue, it is not going away any time soon."

If everyone in an organization has an idea for making an improvement in production or quality, then everyone should have a budget to make that improvement happen. This might be done by reducing other expenses, or an extra shift, or hiring temporary workers.

Organizations should hold a budgeting meeting at least once per year and make the topic of cost reduction a top priority.

A process improvement team should be established to find new ways to lower costs. This team will often generate ideas that can be implemented in the near-term and should not require specialized skills. However, when a process improvement project is suggested, its cost and timing must also be considered. It may take a few months or even years to implement some of them. In addition, they might require additional resources like extra people or equipment that will have an impact on the budget now and in the near future.

Often there is an ongoing need for more resources to complete some projects. In these cases, there should be a separate budget for these resources. For example, it might be an ongoing need for new equipment, new software, or extra workers to complete some projects.

Companies can save time and money by outsourcing most telemarketing and marketing jobs. This can reduce costs associated with employee costs, office space and general overhead. Outsourcing also allows companies to make vital improvements in how they communicate with customers, which can improve company image and increase the company's profits.

Outsourcing increases a company's efficiency and effectiveness by allowing them to pick up jobs that are not "uniquely their own". This allows the company that is outsourcing to focus its resources on better things and increase the quantity and quality of products or services.

Outsourcing also benefits consumers by lowering prices. If a company spends $50,000 per week on advertising, and they contact multiple firms with that job, they can save money by hiring one firm to do the entire job for them. The same logic applies to any number of services: if a company can contact one firm to handle all aspects of a service, their prices may be lower because they do not have to divide profits among multiple service providers.

One issue is motivating people who are outsourced by restructuring their environment once in the new organization.

"The New Yorker" magazine published an article about the outsourcing of IT jobs to India by a U.S. healthcare provider, with anecdotes from both the American IT workers losing their jobs and the Indian software engineers hired to replace them in India. The article cited several problems with this practice, including reorganizing and standardizing workers across different countries, language barriers (the Indian staff were tasked to communicate via email only), cultural barriers (e.g., when Indian engineers were "discovered" watching Bollywood movies during work hours), working at lower wages and different standards so that it can take longer to complete tasks due to factors such as limited Internet access and lower quality materials used for construction of offices. Despite a dedicated and well-qualified Indian team, the overall operation reportedly lacked the same level of efficiency as before.

The "New York Times" reported that in one outsourcing contract between I.B.M. and Jeppesen DataPlan, a subsidiary of Boeing, I.B.M.'s job was to use U.S.-based technical writers to create manuals for using Jeppesen's products (e.g., for radar systems).

Conclusion: 

IBM has been criticized for this work, which is "a special sort of outsourcing . . . a kind that is 'offshoring' one set of skills to another country." In this case, it "attempts to move American IT jobs overseas to save money. The result is that American workers have fewer jobs; they end up with lower salaries; and their skills atrophy. "

Outsourcing has allowed companies to move production off site, reducing their space needs and selling the extra space. However, in some cases companies have outsource work they do not want done (like the handling of hazardous materials), which increases the risk of accidents.