Benefits of outsourcing: Beyond cutting costs

2013-24-10, by Diana

Benefits of outsourcingThere are many myths about outsourcing. The most common myths are that its only purpose is to reduce costs, that it lowers domestic wages, and that it has a negative impact on the economy overall.  Outsource Magazine recently published a great article by Michael Conboy, called Outsourcing Myths, Facts and Statistics. The article highlights these most common myths and illuminates them – with facts.

The article opens with a reminder that outsourcing is not always offshoring, aimed to reduce costs. Rather, outsourcing is a strategic decision to use better resources and ensure business efficiency.

As far back as 2005, Deloitte Consulting predicted that companies will eventually stop outsourcing for the sake of cost-savings, and instead will use outsourcing as part of their business development plan. Indeed, many companies now know that outsourcing is not a panacea, but rather a set of tools that can help create efficient businesses. Recent research by IBM reveals that only 27% of companies outsource to cut costs, whereas 36% are innovators and 37% are growth-seekers, using outsourcing as one of their tools to optimize their businesses.  A company’s outsourcing strategy may or may not involve hiring an offshore team of experts.  In cases where the outsourcing strategy does involve going offshore, it is important to remember that it is not harmful to the economy, and that there are a lot of benefits from outsourcing.

Outsourcing helps the global labor market stay competitive. The global economy has always benefited from openness and free trade. Protectionist and isolationist policies, on the other hand, can typically lead to inefficiency, cost increases, and lower product quality. Moreover, offshore outsourcing does not mean irreversible loss of jobs at home. Although the United States loses millions of jobs, every year it also simultaneously creates more new jobs, resulting in a positive total yield. Forrester Research estimates that 220,000 jobs will be outsourced annually between 2000 and 2015 (around 3.3 million altogether). This is nothing to be feared, rather it is something to understand – and perhaps take advantage of.

For more information on how outsourcing impacts the economy, as well as political and cultural landscapes, check out this white paper: Who Benefits from Outsourcing.

Photo courtesy of ilco via stock.xchng

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