A company “outsources” when it hires another person or company (source) outside its organization to perform work it had been doing itself. Companies typically outsource universal business functions such as bookkeeping, accounting, human resources, payroll, and data entry. The advantages to outsourcing are numerous, both for the corporation who it outsourcing and the business performing the outsourced work.
WHERE DID OUTSOURCING COME FROM?
Advances in modern technology in the past ten years have made outsourcing a viable alternative for many businesses. The advent of the personal computer, modem, internet, and internet hardware and software has made it possible for people to perform high quality work remotely from the main business office buildings. Advances in communication keep remote partners closely linked with the main corporation, ensuring that all information flows smoothly, expectations are clear, goals are met, and information security is maintained.
CORPORATE ADVANTAGE: THE ABILITY TO FOCUS ON CORE COMPETENCIES
Many small business owners and large corporations often outsource their accounting or payroll activities to allow them to focus on their core competencies that add value to the customer. The company sees great benefit in allowing other people to worry about human resources or bookkeeping, freeing their workers up to focus on their specific product or service that they provide to consumers. For each less worker performing data entry or correcting pay problems, they now have a worker to focus on design, innovation, or other functions that increase the corporation’s value to the consumer.
For instance, a start up snowboard maker would outsource their accounting, payroll, and website design and maintenance because they did not understand those jobs well, thereby freeing themselves up to focus on the actual snowboard material composition, design, etc, which they were quite good at. By doing so, they hire experts in each field, which will create the best possible website, keep the best possible account of their money, and know the best way to pay their workers. They, in turn, are free to create the best possible designs and highest quality snowboards, thereby keeping customers happy and increasing their market share.
CORPORATE ADVANTAGE: INCREASED CORPORATE PROFITS
While many companies outsource locally, some larger corporations outsource internationally. These corporations seek workers in nations such as China, India, and the Pacific Rim, where wages and standard of living are much lower than the United States. By outsourcing to businesses in these locations, the corporations are able to cuts costs significantly. These savings are then translated in to a healthier corporate bottom line, provided as stock dividends, or rolled into innovation and development. Through international outsourcing, the corporation gets the same quality of work performed for a fraction of the cost, creates greater profits to please shareholders, and has greater money to invest in product improvement.
CORPORATE ADVANTAGE: WIDER KNOWLEDGE BASE TO PULL FROM
Inter- and Intra-national outsourcing taps intellectual resources all over the planet that heretofore had been wasted. China and India both have major universities that churn out masses of highly trained and qualified graduates in every field, yet these people often stagnated under their repressive government or economy. With the advent of outsourcing, these people can connect with American corporations, allowing our corporations to mine the intellectual resources for our benefit.
WORKER ADVANTAGE: WORK AT HOME
Outsourcing has created a boom in telecommuting and work-at-home parents. Many modern Americans realize that they can perform their jobs from home using modern technology, allowing them to balance their personal and professional lives, while saving the corporation costs in real estate, sick leave, and absenteeism. Many stay at home mothers are now working as “call centers” or “customer support staff” from their home, helping to preserve the family unit while making money to support the family.
WORKER ADVANTAGE: IMPROVED STANDARD OF LIVING IN PROVIDER COUNTRIES
Outsourcing helps bring foreign countries up to the American standard of living, opens up more of the world to commerce, and gives people in those countries a hope for a better future. The people in those locations often have little hope of advancing in their country, and these jobs are a beacon of hope for them. While they are paid far lower than an American would for the same work performed, that money is comparable to an American salary in the local economy, if not better. These people often live in countries with repressive or stagnating governments and economies, and before outsourcing had little hope for a better life. Those same people would make strong candidates for terrorism, and providing them an incentive to cooperate on the international stage would help dry
up the pool of available suicide bombers around the world.
GLOBAL ADVANTAGE: INTERNATIONAL PEACE AND STABILITY
Outsourcing creates international interdependence, thereby reducing the likelihood of wars. China, Taiwan, and Japan have traditionally been enemies to each other over the past few centuries. China has yet to forget or truly forgive Japan for their invasion, and Taiwan continues to chafe for independence from China.
These tensions often boiled over into armed conflict in the past, yet today the three entities are tightly linked by outsourcing and global supply chaining. As the countries become more interdependent through economics, their incentive to go to war decreases precipitously, and that area of the world becomes more stabilized.
GLOBAL ADVANTAGE: INTERCULTURAL UNDERSTANDING
Outsourcing increases global and cultural understanding. When American companies outsourced the Y2K computer code updating to India, a whole new wave of cultural innovation started. Americans now have a greater understanding of India beyond elephants and a red dot. Indians now understand more of American besides cowboys and Beverly Hills 90210. Both cultures benefit from the other as businesses collaborate and share ideas. Business partners visit each country and return home to share their stories and ask their local supermarkets if they stock a certain item that they loved from their visit to the other country. Intercultural understanding grows, and with increased understanding comes decreased fear and suspicion. Each society becomes more open to the other, facilitating the exchange of culture and ideas.
CONSUMER ADVANTAGE: INCREASED COMPETITION
Outsourcing increases competition, which increases product and service quality, along with reducing prices for the consumer. The customer stands to gain from outsourcing in product quality, technological innovation, and price. Just as America saw a vast change in the car industry with the advent of Japanese vehicles, outsourcing will force American workers to work hard to maintain their position at the top of the economic food chain. Outsourcing has created stiff global competition, and Americans will have to become more innovative and work harder to stay ahead of the game. While all the work requires effort, the payoff is enormous in terms of innovation, product quality, price, and economic stimulus to stymied foreign countries.
Outsourcing has revolutionized the way corporations do business. Modern technology has brought the whole world to a level playing field, and the result will be greater corporate profits, stabilized countries, improved economies, greater innovation, and improved cultural understanding. Outsourcing is the way of the future, and the pathway to living in a peaceful, unified world.