Outsourcing has increased in popularity in the past several years. Since mid 1980’s, technology has made it possible for a myriad of small businesses to start up that can contract services to larger companies at a cheaper rate than they could do themselves. Consequently, much of the outsourcing has turned to “offshoring” where services are provided to a company from outside the U.S. This process has met much resistance in the U.S. and remains a hot topic in businesses throughout the global sphere.
This paper will address the questions regarding the advantages and disadvantages of outsourcing. I will attempt to provide a perspective of both the positive and negative aspects of outsourcing. I will address the more controversial issue of offshoring as it pertains to job loss within the U.S. I will use the required and supplemental readings listed in the background information and case as the foundation for my perspectives and opinions.
The overarching reason that companies outsource is to save money. That being said, we must understand that streamlining processes cuts costs.
According to a 1998 survey conducted by Outsourcing Institute, five of the
reasons that companies outsource are:
• Reduce and control operating costs
• Improve company focus
• Gain access to world-class capabilities
• Free internal resources for other purposes
• Resources are not available internally
Without going into each of these independently, it is easy to see that the main premise of outsourcing is the fact that a company can more effectively and efficiently (in dollar terms) pay someone to do internal company functions than they can do it themselves. If you hire someone to do data entry for your company, you don’t have to pay for comp insurance, taxes, 401K contributions, etc. for your full time employee. Even if you want to keep the employee, it may be more cost effective to train them on other internal company functions that are more critical...