Outsourcing: Advantages and Disadvantages

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Outsourcing: Advantages and Disadvantages

Outsourcing can be viewed in terms of a subcontracting process whereby Human resources, manufacturing, or even product is given to a third party company. This phenomenon has brought controversy in various countries because of its impact especially from where human resources have been outsourced. Companies that have benefited from international outsourcing have taken this strategy as a cost-cutting strategy because of the cheap labor they get from their target countries. This paper will pay attention to the advantages and disadvantages of outsourcing from a multinational firm. The firm is known as Gigatek technologies and it is an IT firm. This form is based in India but with globalization, it can carry out its outsourcing activities in the USA, Japan and other developed countries.

First of all, this company benefits a lot from world-class technology. This is done at a cheaper cost as compared to the countries from which the expertise is outsourced. In most multinational companies, the cost of investing in new technology can prove to be quite costly but with outsourcing, things become better. Secondly, this company is likely to gain access to skilled manpower at very affordable rates. This would make the firm concentrate more on its competencies as most of its operations will be well managed by the high skilled personnel obtained by outsourcing. Because of outsourcing, this company is capable of beating the competition. This is because it continues to offer quality services and maintains to maintain its customers. This is done at less costly rates as a result of outsourcing. With outsourcing, India has managed to get highly competent personnel that can carry out more complicated product development activities at affordable costs. Outsourcing is a phenomenon that has seen companies have IT solutions worked out and even innovations implemented with minimal losses. It saves companies from the burden of retraining staff that are required for such and other related procedures. This can even go to the extent of upgrading the services the firm offers in an effective but less costly way. Outsourcing can lead to the production of cheaper products especially in the country from which jobs have been lost. Consumers plus those who are jobless would gain something because of outsourcing. Outsourcing is a phenomenon that has been known to create more job opportunities in the recipient country. This is essential in reducing the levels of unemployment in such countries as China and India. This has been a major economic boost with the multinational companies contributing significantly towards the revenue. Locally there are also benefits of people who work abroad in the sense that their incomes are large and thus a higher purchasing power which is reflected in the local markets by higher demand for products. This is of advantage to both the outsourcing companies and the others who are not involved in outsourcing. The company that has outsourced will be in a better position to free up the internal resources than a company that does not outsource. Freeing the internal resources can result in the more efficient management of internal affairs in the company.

However, outsourcing has various implications that do not go well with some developed countries including the United States.The first issue concerns the resultant losses of jobs especially in the United States because of outsourcing. This can result in poverty and other unwanted repercussions as the outsourcing countries benefit. Companies that are engaged in outsourcing have the associated security risk with the foreign expertise being exposed to confidential company information. This can threaten the security situation in those particular countries.

Looked at from a long-term perspective it is important to mention the countries like china with outsourcing habits are likely to become more costly places of doing businesses as a result of outsourcing. This can be due to over-reliance on low costs to increase their productivity.

There is a threat in the shift from the center of certain services especially from the country from which expertise is being outsourced. A good example would be the shift of the epicenter of software innovation can shift from the US to a country like China or India. There is also a problem with outsourcing because of the loss of flexibility when it comes to the ever-changing business conditions. Such a company with outsourcing activities would find it a bit hard to react to some changes in the business environment. This would not be very good for the firm.

Outsourcing has been known to deprive a companys internal talents that might have developed as a result of some employees experience in the particular firm. Employees are denied a chance to exercise their potential and talents. This normally happens when they pass over the expected work to the foreign experts who may have been outsourced by the management.

In conclusion it is important to mention that even though countries embrace the good things that come with outsourcing, it is vital for them to trade carefully on this road to avoid the bad consequences that can arise from over-reliance on this phenomenon.

References

Jennifer Reingold,Into Thin Air, Fast Company, Boston, 2004, Issue 81, Pages 76-83.

S Baker, M Kripalani, R.D. Hof, and J. Kerstetter ,Software: Will outsourcing hurt Americas supremacy?Business Week, 2004 Issue 3872, Pages 84-93.

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