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Outsourcing has become one of the most contentious business practices of the modern era. At its core, this practice happens when a company delegates part of its operations or services to a third-party provider, which enables them to take advantage of key outsourcing advantages, allowing the business to focus more on its core functions without having to worry about secondary tasks. This also boosts the economy of the country that is receiving the offshoring tasks. However, the point of contention is that this practice holds no benefits at all for the economy of the country of the original company.
This strategy is actually nothing new. Manufacturing companies have practiced this to reduce the cost of making their products for decades now. Companies have also been hiring third-party service providers for a number of functions that they do not consider essential to their core business. One of the outsourcing advantages from this is reduced costs, allowing companies to field more resources towards providing better products. This increased focus on the core of the business tends to lead to an increase in the quality of the product.
BPO companies also help their clients achieve a leaner cost structure than normal. This allows them to be more globally competitive, as they have more resources to put into marketing, distribution, and development. This increased competitiveness opens up more jobs that cannot fall under BPO services, which improves the economy of the client’s country. This also promotes further competition, as competitors of an innovative company will not want to fall behind. In business practice, this means that they will also need to update their products and may attempt to emulate the innovator’s tactics to do so.
Another one of the many outsourcing advantages is an increase in focus on “core competencies.” According to some experts, BPO service providers are actually forcing countries such as the United States to start focusing on re-developing their own talent pools. Others suggest that, rather than competing with India and the Philippines for IT outsourcing, countries should instead adapt and focus more on the functions of business that cannot be moved to other countries or to third-party providers. This, in turn, can also improve that country’s competitiveness in the global market.
In the IT industry, outsourcing services are able to cut down on a number of costs. The largest savings are in development costs. There is a significantly larger talent pool available globally than locally, and this strategy allows companies to tap into that talent pool to get their projects done faster. Programmers from countries like India have a lower salary rate than American programmers, allowing developers to cut the cost of the final product. This also increases demand for the export of computers, since the IT industry will need those to perform its tasks. This is acknowledged as one of the clearer, if lesser known, outsourcing advantages.
All in all, offshoring and outsourcing practices tend to have a negative reputation. However, this is not necessarily the case. There are economic benefits available to countries that outsource a number of tasks. In theory, it actually provides openings to create new jobs as much as it could potentially close old ones. These new jobs will eventually lead to an energized economy, enabling it to participate and compete in the global market. While these jobs may still be in the future, there is a great potential for their future existence. Indeed, there are many outsourcing advantages that can help the economy get back on its feet.