The significance of outsourcing in today's business world cannot be denied. Outsourcing has not only changed the way business is done, but it has also helped to cut costs, streamline organizations and boost profits. There are plenty of reasons why outsourcing is important to both large and small scale firms.
These are as follows:
outsourcing lets you cut costs
outsourcing lets you increase profitability and productivity
outsourcing provides better service at lower rates
outsourcing increases shareholder value
outsourcing increase security and reliability
outsourcing maximizes uptime
outsourcing helps one concentrate on core competencies
outsourcing lets you stay on top of the competition
Now that we understand the importance of outsourcing let us put in into perspective in today's world. Outsourcing at the moment is being hailed as both as both a positive and a negative process. The reason for this is that while outsourcing is helping companies boost their profits; it is at the same time allowing for jobs to be outsourced to other parts of the globe. This in turn is causing retrenchments and downsizing.
If you look at the statistics you will see that in the last year or so, India has doubled the number of jobs outsourced here. What this means is that people have been laid of or retrenched because an alternative source of cheaper labor has been found. Today industry experts predict that by the year 2010 more than 4 million jobs will be outsourced to countries where labor is cheap and affordable. If the minimum wage in the US is $ 5.10 per hour, in most third world countries where jobs are being outsourced to, the minimum wage is often under one dollar an hour. Call centers for example are now setting up offices in India and China, as the labor here is cheaper plus they save a lot of money in salaries.
While the negative aspect of outsourcing is obvious, the positive side of it is that companies save millions by getting the job done cheaper. Take the example of cell phone companies, the reason why phone calls are now so much cheaper is because these companies do not have to spend much money on workers salaries.
Some of the more common jobs that are outsourced include; back office and research and development jobs such as call centers, transaction processing, ship design, software development services, web site development and design, financial research, medical transcription, IT consultancy, product design, and tax processing. Most jobs that are outsourced are done in the financial, insurance, technical, software and banking sectors, as these jobs are labor intensive.
Outsourcing jobs benefits
So why do companies want to outsource jobs, when they have their own employees to think of? What exactly are the benefits of outsourcing jobs?
The answer to these questions can be summed up in the following points:
Outsourcing jobs help to improve a business' focus. What this basically means is that with the help of outsourcing companies can focus more on boarder issues while the operational angle of the business is done by a third party.
Outsourcing jobs provides access to world class capabilities, as your business gets the benefit of an international staff.
Outsourcing jobs accelerate the streamlining of a business. This is because businesses are allowed to focus more on the long term goals rather than on operational concerns.
Outsourcing jobs means that risk is shared. This means that companies become more flexible and more dynamic and are better able to make challenging business decisions.
Outsourcing jobs mean being able to pay attention to more strategic activities of a business, as the company changes its focus from non-core activities to activities that are able to boost profits in the long run.
Outsourcing jobs mean tax cuts
Outsourcing jobs mean cheaper and more economical labor.
Outsourcing jobs mean increased productivity, by employing more skilled man power.
