Busting the Outsourcing Myths

www.executivebrief.com – Outsourcing does benefit both sources and destinations of offshored work.

Thousands of workers in advanced economies have seen their jobs offshored to low-wage economies. Thanks to falling telecommunications costs, business process outsourcing has become a de facto approach to further increase corporate profits. Nowadays, thousands of white-collar jobs are being shipped to developing economies as companies search ways to lower operating costs. These white-collar jobs include customer service, R&D, documentation, and not to be missed, software development. Various emerging markets have since been competing against each other in the race to sell their armies of engineers, scientists, and accountants - to name a few - to companies based in the North America, Western Europe, and developed Asian economies.

Because of the increasing number of jobs being off-shored, even those who first supported offshoring wavered in their conviction about the advantages of shipping back-office operations abroad. Furthermore, there is much talk about workers’ rights, economic damage, and low-quality of work because of outsourcing.

Myth-buster #1: Most off-shored work require generalist skills

One of the best arguments for outsourcing is that the jobs that are being shipped abroad are those that require basic skills, such as customer service and general IT services. As companies employ offshore workers to perform jobs that require low- or mid-level skills, they can focus on aspects of their own operations that need specialist skills and explore their best workers’ unique strengths. While it is also true that many workers will lose jobs in the process, what companies and governments of developed economies can do is create work opportunities that need high skill levels. Gone are the days of generalists; this is the age of specialists.

Myth buster #2: Outsourcing benefits the economies of both countries

As offshore services entered the global trade, outsourcing thinkers believe that the global labor market benefit both countries that ship out jobs and those that provide outsourced labor. A study performed by McKinsey Group, “Offshoring: Is it a win-win game?” (2003), says that for every dollar that a company spends on outsourcing gains a return of $1.14. The savings that companies make by allowing low-wage workers to perform certain parts of their operations can be reinvested; reinvestment creates new opportunities for onshore workers.

Companies also look at the economic possibilities of outsourcing destinations. As much as they consider the low wage requirements of their offshore vendors, they also want to explore the possibilities of establishing businesses in the economies where they ship back-office work. A healthier local market suggests business opportunities and continuity of offshore operations.

Myth buster #3: Off-shore workers save high-turnover operations

As an example, jobs that suffer from high attrition rates in Western Europe can be better performed by highly motivated workers from Eastern Europe. Typically high-turnover work, such as customer service, software engineering, or data encoding are essential to the success of companies. Because off-shore workers have more opportunities that are otherwise unavailable if not for outsourcing, tasks that workers in advanced economies shun for bigger career opportunities can be performed by off-shore workers.

By ExecutiveBrief ExecutiveBrief, the technology management resource for business leaders, offers articles loaded with proven tips, techniques, and action plans that companies can use to better manage people, processes and tools – the keys to improving their business performance. More at: http://www.executivebrief.com

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