This virtually means that the international community could soon observe mutations in the type and nature of the outsourced processes. Advantages and disadvantages of outsourcing
In general terms, companies are looking to outsource growing numbers of more complex operations as they are not willing to assume the risks and make the necessary investments. In this order of ideas, they outsource the operations to firms which have already made the investments and assumed the risks. "Organizations are reluctant to invest in and maintain cutting-edge technology and technical specialists internally, when they know that similar assets exist externally, and were developed with others' investment and risk" (Greaver).
While the companies recognized and capitalized on the benefits of outsourcing, the communities identified the limitations of the processes. The most common dissatisfaction was linked to the fact that outsourcing took jobs away from national workers and gave them to foreigners. In 2003, over 300,000 jobs within the United States were lost to outsourcing, and the figures were expected to maintain an ascendant trend (Schniederjans, Schniederjans and Schniederjans). But the real numbers far exceeded the initial estimates and by 2007, the total jobs lost in one year alone had reached 5.6 million. "According to a study from the Economic Policy Institute, the U.S. lost 5.6 million jobs as a result of the U.S. non-oil trade deficit in 2007 alone. 70% of these jobs were in the manufacturing sector" (Thomas, 2009).
The natural response to these events was that of an increased resistance to outsourcing. Employee groups pressured the federal agencies to develop and implement new legislations that would better protect the jobs of the domestic workers. Several government officials became involved in the anti-outsourcing rhetoric and supported programs for national employment in the detriment of foreign contracts. In 2004, the state of Tennessee was for instance the first to implement an anti-outsourcing program; it basically revolved around the stimulation of American companies to hire national contractors to perform informational system services.
Following the example of Tennessee, 36 American states developed legislations to reduce the outsourcing phenomenon. Still, most of the one hundred bids have not been legalized and are still discussed at the federal level. Their existence however points out to a growing trend of better regularization of outsourcing activities, generally in the sense of their restriction (Schniederjans, Schniederjans and Schniederjans). The trend could be maintained in the immediate future due to the internationalized economic crisis, and might be supported by the necessity to create national jobs and support domestic industries in order to overcome the financial hardship.
2010 looks like an interesting year in terms of outsourcing and is projected to bring about several changes. At a general level, the economic revival which has been foreseen is expected to lead to several delayed outsourcing contracts to be resumed. This would materialize in an increase in employment rates in India and other Asia-Pacific less developed countries, and their adjacent economic boost of 8 up to 10 per cent. While employment and economic state is expected to increase in the United States and the developed European countries, their rates are expected to be lower (Taylor, 2010).
In terms of specific outsourcing trends, the top ten most discussed expectations for 2010, as identified by the International Association of Outsourcing Professionals, are as follows:
1) Outsourcing contracts that have been frozen due to economic instability will be reestablished and acted upon
2) Companies will realize that the expenditure costs with outsourcing have not always been beneficial and company relations will focus more on better stakeholder interactions and operations that add more value to the entity
3) Companies will seek to sign flexible outsourcing contracts, rather than rigid, long-term ones
4) Service providers are expected to unite forces in mergers and acquisitions as a means of consolidating their positions and reducing the threats of an unstable economic climate
5) Economic rates and employment are expected to increase in India and other Asia-Pacific countries, while the growth rates in the United States and Europe will be inferior; more young graduates will be hired in outsourcing deals
6) the traditional outsourcing destinations will lose ground to new countries, such as those in Central or Southern America
7) a higher level of competition among service providers will occur
8) New technological advancements will be incorporated to add more value to organizational processes, increase their efficiency and the overall organizational performance
9) in light of the incremental focus placed on environmental and social responsibility, outsourcing companies are expected to feel growing pressures in terms of respecting these new demands
The outsourcing phenomenon is one of the most discussed topics within the contemporaneous society, attracting both fierce disclaimers as well as ardent supporters. Each party has strong arguments that back their position. The supporters forward the several advantages of outsourcing, such as increased emphasis on core operations, reduced costs or shared risks.
As it has been mentioned throughout the previous sections, outsourcing operations generally revolve around non-core company processes. By outsourcing some of the complementary processes, the company is better able to focus on its core operations. It will as such strive harder to satisfy the customers through the offering of higher quality products and services and it will also strive to satisfy the needs of other categories of stakeholders. In terms of customers, these will be better satisfied as their access to more cost effective and high quality products and services will increase, but also because their access time to the respective items will decrease. The benefits of the company being better able to focus on core processes are available at a community level.
Another major advantage, probably the most important one, is that the outsourcing contracts save the domestic company significant financial resources. India has been a desirable outsourcing destination due to its ability to offer same quality services as in the United States, but at significantly lower prices. Studies have shown that companies outsourcing call center services, billing or other such services to India can save up to 60% of the adjacent costs (Outsource2India, 2009).
Directly pegged to the incurring of lower costs is the fact that, as the company outsourcers operations, it is no longer forced to invest in infrastructure, personnel and other business components. This virtually means that additional savings are made, and that the financial resources can be used to better train the internal staff, to increase the levels of profitability, those of core process productivity and so on.
Outsourcing creates more jobs and more opportunities within the foreign countries. In other words, companies which outsource support the development of the communities in which they operate through the creation of more jobs -- and the reduction of the socio-economic problem of unemployment -- but also through the payment of taxes to the local budgets. This money would be used to improve the local infrastructure, to support socially and economically disadvantaged categories, to improve the educational system, the medical system and so on.
But most importantly, outsourcing practices create advantages for the company that can operate at higher levels of efficiency or which can become more competitive. Outsourcing creates competitive advantages for the organization due to all of the previously mentioned benefits, but also though its ability to increase the company's access to specialized services. "Outsourcing can help your organization gain a competitive edge in the market. You can also get access to specialized services for different business processes and thereby provide your customers with best-of breed services. Such strategic outsourcing can give your business a competitive edge among your peers. The benefits of outsourcing can give your organization a cutting-edge in the worldwide market" (Outsource2India).
A final benefit of outsourcing to be hereby mentioned is the ability of the companies in both domestic as well as foreign markets, to construct relations on shared risks and then to share the resulting profits. A relevant example in this sense is the occurrence of a union strike. If a manufacturing company encounters such a situation, then its totality of operations within the country is compromised. While if the strike or other union problem emerges within the foreign plant, the domestic company would not be negatively impacted to such an intense degree (Meyer, 2010).
Despite the realization of the benefits generated by outsourcing to the company or the communities of stakeholders, there are also vehement disclaimers of the outsourcing process who argue the existence of several negative points. One of these points is the loss of jobs within the domestic market of the company. And the general counter argument was that outsourcing only aimed at low skilled jobs, meaning as such that it directed the American citizens to get higher levels of education, strive towards better paid jobs and improve their living standards. Yet, the past few years have shown that American…
Advantages and disadvantages of outsourcing
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