In today's economy, there are many things that companies need to do to try to lower their costs and increase their profit margins.
There are several different ways that companies can do this including outsourcing to other countries.
Outsourcing is a process where companies use business contracts with a third party who provides services for them that would otherwise be done in the company's own country.
Outsourcing is a great way for companies to save money, but there are many problems that can come with outsourcing.
Different companies outsource for different reasons.
Each company may decide to outsource for different reasons or for different benefits.
Some of these examples of outsourcing include: 1.
Saving.
One of the most sought after benefits is savings.
By a company going to another country to help lower costs of overhead, they can find significant savings.
While it doesn't always look the best to pass the jobs off to another country, it may be extremely inefficient to take the time to train employee to specialize in something when there are already people in another country who are good at those specialized skills.
By switching to a secondary country who has already mastered the specific skill set you need, you will save time and money.
2.
Another benefit to outsourcing is the flexibility with staffing.
When there is a busier season, outsourcing allows you to higher the amount of people you needs.
Likewise, when business slows down you also will have the freedom to release those workers when you no longer need their assistants.
3.
Also, outsourcing can help a company that has high operation costs.
Over time the process that goods are made will change.
As these changes take place, departments that aren't managed as well will see costs rise.
To make an effort to take control of these costs it may be best to outsource those departments since another country may be able to better manage such departments.
Outsourcing has plenty of problems that come along with it as well.
When a company is deciding whether outsourcing is right for them, they should consider these examples of problems other companies may have experienced: 1.
When a company decides to outsource, they are deciding to give up some control over whatever aspect it is that they are outsourcing.
Once there is a signed contract or power given to another country to do a task, the managerial control belongs with the other country.
While overall the company still has all control because there is a contract in place, the way the secondary country does a task or how they run is up to them as long as they complete what is outlined in the contract.
The secondary country won't have the standards or goals as that of the company because the secondary country's goal will be to make a profit off of companies using them for their services.
2.
Another problem includes costs that the company does not foresee and address in the contract.
While the secondary country will need to work under the means of the contract written, there are going to be costs that will end up being over looked that the company doing the outsourcing will be responsible for.
Other hidden costs can include paying for a lawyer to review all contracts between you and secondary countries.
Since it is the secondary country's business and they have written these contracts before, you will be at a disadvantage.
3.
Lastly, outsourcing can lead to problems with security and confidentiality.
Since the heart and soul of a company is the information that keeps it running, such as payroll or medical records, once information is outsourced there is the possibility of that information being compromised.
If a company is outsourcing and needs to share information such as product details, like drawings and formulas, then the company needs to be particularly careful.
This means it is important to carefully look into the secondary country that you want to outsource to so that you know your data is not going to be in danger.
4.
Lastly, outsourcing may give a company a bad image.
Many people may believe that outsourcing is wrong and may therefore go to another company for similar goods or services.
By deciding to outsource, your company is giving up jobs in its own country which doesn't help fuel the economy.
The people who will have lost their jobs will have ill feeling towards the company which will lead to bad publicity for the company.
As I have explained there are benefits and downfalls to outsourcing.
While I have listed only a few examples, it is clear that there are both problems and benefits that come from outsourcing.
Some benefits include saving money, having more flexible staffing, and to help save departments that may have risen in production costs.
On the other hand, there are issues that come from outsourcing including giving up control on some aspects on the work that is being outsourced, hidden costs, threats to a company's security and confidentiality, and may in the long run lead to a bad public image for the company.
Each company has their own preferences, so what may be right for one company, may not be good for another.