Outsourcing Case

Outsourcing

Outsourcing is a subcontracting process which allows companies to hire a third-party to process jobs. It involves numerous amounts of jobs from customer support lines call centers (telemarketing) to real estate management and accounting. When United States firms import services from other countries, those dollars spent are sent back to help our economical needs. Outsourcing jobs overseas can increase the productivity, profitability and competitiveness of United States companies.

The advantages of outsourcing helps companies cut cost and stay ahead in the competition. The rise of outsourcing has led to increased competition among service providers in many countries. These countries not only have to compete among themselves but with counterparts from other countries now slowly catching up. Such increased competition leads to lower prices, better quality, and greater selection. Also, greater competition spurs the relocation of labor to more profitable sectors of the economy. Outsourcing cuts labor costs drastically allowing companies to sell merchandise at a cheaper price and increase profit margins. This in turn induced larger savings from outsourcing which constitutes in more money to buy more merchandise and the building of more factories. Companies can get access to newer and better technology at a lower cost. The dynamics of offshore outsourcing are changing rapidly. Government outsourcing has been around since the 1980's but it wasn't until the 1990's when it started to show and make a difference. During the 1990's the call center industries blew up. They produced 10 billion dollars more than they had in the past ten years. Not only were they at a 10 billion dollar profit, but they also sustained a yearly growth rate of 25%. By 2005, outsource call centers had reached 30 billion dollars in revenues in the United States, 20% of all customer service contacts were made by outsources as stated in CNET News.

Outsourcing benefits the company and at the same time it benefits the third-world country by providing jobs both there and in the United States. "Saving from outsourcing allowed companies to create 90,000 new jobs in 2003, with more than one in ten of them in California alone," according to money central. With the money earned from outsourcing, companies are now able to provide proper training programs for their employees, better pay, and health benefits. As of now, outsourcing has created 317,000 jobs in the United States and 34,000 of them are located here in California. Companies are able to have their services running 24 hours a day. While Californians are working their basic 8-5 shift, people in other countries are sleeping. Likewise, when we are asleep they are taking care of business. Not only does this benefit the company but it also helps the customers. Customers are able to get in contact with the call center at any time of the day or night, and their problems will be taken care of. If for some reason the customer would need a product to be shipped to them because of our partnership overseas, the company would be able to provide rush service for their customers. With timely deliveries and high-quality services they are able to impress their customers. Outsourcing benefits the consumer because of increased customer satisfaction. Also, customers will remain loyal to the company and continue to purchase their goods.

Increasing cost of production, labor cost, taxes, and other many direct or indirect expenses has boosted the growth of outsourcing in India, Mexico, Argentina, and many more other countries around the world. With the improvements in these countries, European and U.S. companies are eyeing them to outsource their business projects in order to cut costs and get more efficient work done for the same expenditure. The business world is characterized by growing competition. In order to stay ahead in the race, established companies outsource their time-consuming and labor-intensive jobs to other off shore countries. By doing this, they can concentrate more on areas of their core competencies. This way companies would consider more on marketing, expansion, takeovers, and mergers.

Outsourcing allows organizations to form strategic partnerships that focus on core competencies, thereby reducing corporate costs and increasing productivity. There is no doubt that outsourcing can introduce creative thinking and the potential to get a fresh look or gain new perspective for old or existing problems. Outsourcing also gives the advantage of bringing in qualified people into an organization without having to hire them as full-time employees. Most importantly, outsourcing certain jobs can save time, money, and energy. Deadlines can be met. Projects can be completed. Labor costs can be kept down because you can hire on an as-needed basis.

While outsourcing can be beneficial to many companies in the financially, efficiency, and productivity of products, it can also be a rough business. Outsourcing creates a resolute environment that lead to many businesses going out of business because competitive pressures can become overwhelming. Despite the disadvantages to outsourcing, competition between private and public sectors have made the business technology world what it is today. Without a competitive advantage we would see less variety and low-tech items in the market.

In the United States we outsource mostly everything that we do. We do not make anything in America these days. It is hard or almost impossible to find a product which states that was manufactured in the United States. Mostly all of our goods are imported from other countries like India, China, Japan, and Mexico. A lot of companies claim that they outsource in order to compete with other countries. Companies say that since they have to pay employees at least minimum wage in the Unites States, they cannot afford to sell certain goods at a cheap price. Therefore, they go to other countries where they pay their employees one fifth or less of what they would pay them here.(Bray, page 1) They claim that lower costs equals lower prices for consumers.

The question at hand is whether lower costs are what are best for Americans and best for our country. The problem is that outsourcing causes fewer jobs which equal growing unemployment rates. If people cannot work and make money then they are not able to afford all those goods and services no matter how cheap they are. Not only are our goods being outsourced, but a lot of services are outsourced as well. Since most