Outsourcing: The Pros and Cons

If you own a computer or piece of electronic equipment, chances are you may one day have to make a call to a tech support or customer service department. And if the product in need of repair happens to be manufactured by one of the many companies that bases its IT or customer service support center in another country, your experience with the representative with whom you spoke likely plays a large part in your general opinion of the outsourcing debate.

Outsourcing, also called “offshoring” when referring to overseas workforces, is commonly referred to as the practice of transferring jobs to other countries in an effort to reduce company labor costs. As more people lose their jobs to outsourcing or become increasingly frustrated by having to overcome language barriers to communicate with service employees, the outsourcing trend is failing to meet with general approval in the United States. Reactions to a 2004 poll in King County, WA concerning the economical impact of outsourcing varied, but many respondents felt that long-term outsourcing will generally harm the American economy and workforce.

“…As a consumer, I feel cheated that a company wants my money but doesn’t want to pay my neighbor $7 or $8 bucks an hour to take my calls,” one respondent wrote. “‘Globalization’ is an international term for ‘feeling free to get away with cheap labor.’”

Regardless of public opinion, however, the outsourcing of IT jobs, nay, jobs in general, does not seem to be going the way of the dodo just yet. The CIO 2006 Global Outsourcing Guide, released in July, cites the 2005 Duke University CIBER/Archstone Consulting study, saying that 73% of Fortune 2000 companies cite offshoring as an important part of their overall growth strategy. India is the number one destination for U.S. company outsourcing, and many companies name China as a front runner for future outsourcing possibilities, along with several Latin American countries, such as Brazil and Mexico.

As with most large-scale corporate practices, outsourcing has its benefits and its downfalls. Though outsourcing obviously has positive impacts to the economy and citizens of the countries to which the jobs go, it hs left many Americans disgruntled, jobless, and distrustful of corporations that practice it. A variety of arguments can be made for and against outsourcing :

Pros:

  • The technique is a money-saver for the corporations who employ it. Specifically, from a business perspective, outsourcing can potentially:
  • Lower personnel costs
  • Gain economies of scale
  • Allow focus on the core competencies of the company
  • Free up space in company buildings for other uses
  • Increase speed of delivery for outsourced activities
  • Increase quality of delivery for outsourced activities
  • Free up management time
  • Reduce cash outflow
  • Increase employee productivity
  • One theory on outsourcing states that outsourcing boosts the U.S. economy by stimulating trade and
  • creating more jobs
  • Outsourcing works both ways – many jobs in America are jobs that have been outsourced to America
  • by foreign companies
  • Some companies claim that bilingual workers in foreign-based call centers will benefit people who live in the U.S but who speak English as a second language

Cons:

  • Loss of jobs for Americans, especially those in customer service or technical fields
  • Loss of direct control by the company over the management
  • Quality problems, especially since, as stated by the CIO outsourcing guide, American workers outrank overseas workers in terms of the size and availability of the labor force, education
  • level, relevant experience, language skills and turnover rates
  • Slow response time, which can only lead to the frustration or anger of the customer
  • Some customers have problems understanding the accents of overseas service agents
  • Slow resolution times
  • Many companies that outsource either lack internal process policies for specifying work or lack the the ability to effectively manage internal communication
  • Due to a variety of factors, many overseas call centers are unable to produce desired results for the customer
  • A reduction in product sales led by customers who are either frustrated with the company’s service or who boycott companies that outsource
  • The problems above usually lead to unhappy customers, employees, and unions

Although the benefits to the companies seem to outweigh the benefits to the American people, low labor costs will likely continue to be the driving factor behind offshoring, and current trends do not show a decrease in the practice. To ensure long-term financial success, companies must properly serve their customers, regardless of whether or not this entails outsourcing work. By focusing on striking a balance between saving money and providing the customer with quality products and services, a company has a better chance of sticking around in the market to serve the same loyal customers in the future.

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  • http://twitter.com/TechnicalOmni Technical Support

    The loss of jobs in America you speak of are really negligible. Think about it, the type of jobs that these Indians are taking are much less than desirable.

    Imagine being an operator that has the job of simply looking up customer details and validating them, then transferring them to a tech support agent. Most Americans would find this mind-numbing and not go for it.

  • http://www.virtualemployee.com Outsourcing

    Nice Post!!!

    The impact of outsourcing in the US economy has evoked extensive emotions to many, especially from presidential candidates and labor groups who criticized its practice. But economists and chief executives defend it as a natural succession of the economy.

    The effects of Outsourcing:

    • Reduced costs
    • Improved or lower quality
    • Reduction or increase in time
    • Better or poorer customer service
    • More time for executives to focus on key business processes
    • More competitive
    • Easier to manage
    • Increase cash flow from selling equipment
    • Less benefit costs
    • Greater expertise in business processes
    • Great problems when a divorce occurs with outsourcing vendor
    • Problems with customers understanding foreign accents

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