It is a matter of fact that many companies nowadays are outsourcing and continue to outsource work in other countries. It is the evidence that outsourcing is successful, because it increases the quality of product and lower costs. There is a suggestion that outsourcing is “is a form of technological innovation analogous to machines on a car assembly line”. There are many positive moments concerning outsourcing.
Firstly it is necessary to define main advantages of outsourcing for a multinational firm: the ability to purchase intellectual capital; the ability to concentrate on core competencies; the ability to anticipate the future costs better; the ability to lower costs. (Frankland 2004) But it is apparent that outsourcing has to be provided with new tax breaks and new financial incentives for future development. Due to work outsourcing more workers remain employed and the unemployment rate is dropping.
Then outsourcing is beneficial for economic freedom, economic development and growth, for creating new jobs and improving living conditions. According to recent studies, countries, which practice work outsourcing, illustrate higher indicators of economic growth. Then next moment to mention is that outsourcing suggests efficiency meaning that it leads to more final output with lower costs for inputs. Thus, the process would be lower for all families and firms within country. Then the lower the prices are the higher living standards and the increased number of jobs.
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Nevertheless, it is suggested that everyone benefits from outsourcing, because it suggests costs decline, customer’s benefits, etc. Summing up the main benefits of outsourcing, it is necessary to outline that outsourcing reduces overheads; minimizes capital expenditures, eliminates investments in fixed infrastructures; re-directs workforce into core business; provides access to specialized skills; saves training costs; improves speed and service; increases customer’s satisfaction; provides value-added services; enhances strategic advantages, etc. (Kripalani & Einhorn 2003)
Although outsourcing is developing nowadays it faces a number of problems and negative moments. The most disputable moments are quality of service, labor and economy, security, etc. it is admitted that there are less opportunities for agents to show work ethics and loyalty. The quality of service and technical support are told to be significantly lower compared to that of the “in-house”. There are also compliances that outsourced services are more expensive and worse. It is real problem that outsource companies are not able nowadays to meet the required standards of quality.
For example, managers working in outsourced companies assume that all of them are similar and they underestimate the service needs. Therefore, the first problem is lackluster quality of service and technical support. Such service is considered to be additional negative surprise. Outsourcing jobs abroad is like avoiding payment of taxes. (Reingold 2004) The next problem is that outsourcing “revolves around the costs associated with transferring control of labor process to an external entity in another country”.
(Frankland 2004) It means that outsourcing significantly hurts the country’s economy. It is also mentioned that government has to impose legislative measures against companies which transfer jobs abroad. There are some suggestions that it is necessary to increase taxes on outsourcing companies. Outsourcing companies are threatening the livelihood of domestic employees. There is an idea that outsourcing is analog of dumping. It is seen that outsourcing is faced with criticism and many problems. (Reingold 2004)
Actually, outsourcing is beneficial firstly for multinational companies and their boards of directions, whereas it is difficult to assess whether workers benefit from outsourcing. On the one hand, larger number of people is employed, though in some cases the salaries are lower compared with the salaries workers would earn within country.
Frankland, Jane. The Benefits of Outsourcing. Finance Today, 3 (2004, March): 5-7. Kripalani, M. & Einhorn, B. A Tempest over Outsourcing. Business Week, June 16 (2003): 20-21. Reingold, Jennifer. Into Thin Air. Fast Company, 81 (2004, April): 76-83.