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Outsourcing is a process adopted by an organization where it gives in contract to other vendors or agencies any of its functions relating to business processes like production, distribution, marketing, selling, advertising or process of management that it perceives to be cost effective for the company. This is taking in consideration that it will be done by outside agencies and performance of which might be adversely impacting the core activities of the company. The intention of an organization behind outsourcing is optimization of resources like labor and capital for canalizing the same to the core activities of that particular business.
Outsourcing is most commonly observed in the areas of information technology, marketing, customer service, management and human resources. There are basically two parties to outsourcing activity- the client which is the organization contracting for outsourcing and the supplier or the service provider rendering the contracted services on behalf of the client by acquiring the client’s business resources like manpower and assets. In a business setup of large scale, the client may opt for outsourcing from different service providers with the support of a strong and strategic corporate governance policy spelling out the responsibilities of the parties and integration of the operations.
Outsourcing is not welcomed but criticized if in the public perception it is the cause of local labor unemployment as has happened in USA. The negative element of destroying job opportunities of the native people has made outsourcing a controversial issue especially in developed countries like USA. Outsourcing is economically beneficial for a country as more economic business process means lowering of prices. At the same time there is the paradox of outsourcing eating into the employment availability for local workers. In this context, unlike in the countries of European Union, not much protection is offered by US labor laws giving scope for controversy among public regarding outsourcing. However those supporting outsourcing believe that the cause of such controversies lies more in internal factors of USA like class conflicts rather than in the issue of outsourcing. Notwithstanding such arguments, outsourcing became a contentious issue in the political stage of USA playing a major role in the Presidential election of USA in 2004.
The Democrats took up the cause of the internal workforce of USA by taking an anti-outsourcing stand. The opposition of majority of American people to outsourcing mainly stems from the transfer of processes involving labor to other service providers in another country increasing the prospect of unemployment in the home country. The apprehension of the economy being affected by outsourcing of jobs to other countries by US corporate is not entirely unfounded and imposition of some kind of legislation discouraging such transfer of labor is widely felt. It is also suggested that the companies outsourcing be taxed more.
Outsourcing is criticized mainly on the ground that it results in unemployment for the domestic workforce. But then there are other issues also that attract opinions against outsourcing. It is thought that outsourcing by companies reduces cost at the expense of productivity. The apparent reduction in cost of labor by outsourcing, for example, Indian labor is cheaper than American labor, may in reality be hampering productivity by investing less in technology.
Cheap labor by affecting productivity of the worker and quality of product may cause ultimate loss to a company outsourcing. Labor insecurity due to outsourcing is another bone of contention. The advantages of higher salary and better standard of life that a worker in an underdeveloped country may enjoy as a result of outsourcing is really not that secure as the service provider or the new employer may impose more difficult conditions of service. |
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Posted on 12/10/2007 11:14:38 AM by
Reyna Abbott
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About The Author:
Reyna is an expert in Human Resources matters with focus in Recruitment, Employee Relations and Benefits. She has invested 8 years working in the HR field; growing in the various industries such as manufacturing, retail, transportation and non-profit organizations for both union and non-union environments. |
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As much as I see other people's point of views I would never agree with outsourcing labor for the most part. Yes it saves money to the companies but it also takes cash away from the US market. Spending dollars that could circulate in the domestic economy goes to India, Asia and Latin America. Now it seems as though everything is outsourced and unemployment rates keep raising. Not a good idea.
Posted by: Layla Bennett, on: 12/11/2007 8:59:04 AM
Rated: 4
WOW! that was an interesting article and video. I do see your point of view Layla, but you also have to think of the positive benefits of outsourcing. By being able to find economical sources of labor, organizations will be able to extend a good product at an affordable price. I believe the pains of this process will bring very positive things in the future. We are just adapting.
Posted by: James McKenzie, on: 12/12/2007 8:49:47 AM
Rated: 5
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