Internal Customer Service vs. Outsourcing

¶ … internal customer service vs. outsourcing the customer service for a small company

Internal Service vs. Outsourcing

The forces of globalization have become stronger throughout the past recent years and they have led to numerous modifications within the business community. The liberalization of markets represented not only a better access to various customer markets, but also to resources. In this order of ideas, organizations are now able to get access to international funds for their investments, and purchase cheaper resources from abroad. These resources include not only commodities or technologies, but also human resources - a process generally known as outsourcing. Also known as the export of jobs, outsourcing can be defined as a process in which "a company [...] contracts with another company to provide services that might otherwise be performed by in-house employees" (Thompson, 2008).

The issue of outsourcing is extremely controversial, with disclaimers stating that it steels jobs from the American population and the advocates arguing that the process helps with the growth and development of American entrepreneurs, and therefore, the sustainability of the national economy. Whichever side one takes, fact remains that the brand "Made in the U.S." has become rarer, but also more desirable. In this instance then, there still are organizations which strive to use their own employees in the detriment of foreign ones. This endeavor presents some costs however. They are succinctly presented below:

Higher wage costs

The basic idea at the core of the outsourcing process is that it allows companies to benefit from the same amount of work at lower prices. They often outsource their tasks to developing countries with emergent markets, where labor costs are significantly lower. Given then that the minimum wage in the U.S. is higher than that in other countries to be considered for outsourcing, the company would have to pay higher wages for its internal employees.

Preferring then to provide the customer service internally, the organization would register higher costs in terms of the salaries. These costs are not as obvious as the costs of a new investment for instance, but they are real and they would most likely materialize in reduced economies.

Personnel training

Another advantage of outsourcing is not only that the foreign labor force is cheaper, but it is often better qualified to do a particular job. The labor force in emergent economies is extremely capable and has learned how to perform numerous tasks and adapt to new requirements. The local employees on the other hand are often used to what they do and find it extremely difficult to change their approach to professional tasks (McDonnel, 2008).

Therefore, if the organizational leaders decide in favor of handling their customer services with internal employees, they will have to offer training programs, which in turn generate additional expenses. Foremost, training takes employees away from their work and therefore generates reduced operational efficiency.

Higher costs with benefits

An outsourcing contract will be simple and clear and will generally only state the object of the contract and the sum of money to be paid at established points in time. The American company would only pay the amount of money in the contract, to the manager or representative of the foreign company. The U.S. manager will not have to deal with employees or their demands.

With internal service however, the manager will constantly have to deal with the employees and their demands. He will have to offer medical coverage, leave days, premiums and bonuses and so on. These once more increase the costs and negotiations and meeting have the ability to decrease operational efficiency.

Hiring and retention costs

Considering that the services to be offered to customers are a new line of business for the organization, they will have to recruit, select and hire new staff members. This will imply costs in both time as well as finances. The people in charge of the hiring process will have to take time off from their tasks, resulting then in a reduced operational efficiency.

Once the new employees are hired, the employer has no guarantee that they will like the job they perform and that he will be able to retain them. Ergo, he will have to implement human resource strategies to increase the on-the-job-satisfaction. He will have to offer various incentives and he will have to ensure that the job is challenging and rewarding for the employees.