It Outsourcing Basics

Outsourcing, no word in today’s workforce is so loved or hated. Depending on who you are it is the greatest thing ever or some evil deed of evil money hungry businesses at the expense of American workers. But what is the truth? Is it good? Is it bad? Is it both? Perhaps more importantly, what is it exactly?

Many people think that outsourcing is jobs that were held in this country going somewhere else. That is not entirely accurate. Outsourcing is actually one company paying another to do some work for it. Outsourcing can be as simple as paying a company to paint your building. Or it can be as complex as paying a company to control your human resources department.

When you think of outsourcing it is probably more accurate to think of it not as people’s jobs that are going somewhere else but as a job, as in something that needs to be done, going to another business. For example if you have a company of forty people and you decide to get a new computer system for everyone. You may pay another company to do your IT and customer support for those computers. There for you didn’t take away a job from someone you just didn’t create one for the need. You paid another company to do it. They then can use one of there people who is familiar with the system already, or they take on the cost of training someone.

Companies outsource for many different reasons. Perhaps the best know and least understood of those is to save money. Most people probably think that it is just greedy rich CEO’s trying to get richer. While in some cases this may be true, more frequently it can be in response to an overall downturn in the economy. Companies trying to maintain in the hard times are forced with trying to find ways to save money. According to Julekha Dash in her article “Cost cutting may spur IT deals” on computerworld.com “The cooling economy may prompt firms to outsource more IT or cost cutting reasons.” In the same article they stated that in a pole given to 150 American and European companies 39% of the companies listed saving money as there primary reason for outsourcing. Saving money was the number one answer given.

When companies save money theoretically so do the people who rely on that company for goods and services. If GM saves money than your new car theoretically should be cheaper and that’s the way it is supposed to go for any other product or service. This is always the case though. Saving money can be a way to increase the profit margin for companies. The save don’t pass the savings on to you and pocket the money. This can be good for employees at the company (probably more so the higher you go up) and it can be good for stock holders if it is a publicly traded company. Sometimes the companies can reinvest the money back into the company and use it for marketing or innovations which can intern help the company make more money.

Saving money isn’t the only reason to outsource though. In Dash’s article the number two reason given was “Having access to experts” that was given by 38% of the companies. But what does that mean? Simply put it means that good help can be hard to find. And if you’re a company that needs to have something done it may be hard to wait and see if you can find people that are able to do the work for you. It may be easier to outsource to a company that already has skilled employees trained to do the work.

In the days were most outsourced jobs were low wage and for unskilled labor most people didn’t pay much attention. Or no one brought it too there attention. When a McDonalds closes not many people think about the people who are losing

there jobs. I mean who in the U.S. wants to work a minimum wage job anyways right. But when the jobs are of people who are making forty to eighty thousand a year people sit up and pay attention. Middle class hard working people are losing

there jobs something has to be done. This is the United States who has better trained people than us? But when people ask these questions they often don’t like the response. Countries like India, and China have for years pushed there society to strive to stay cutting edge with science and computers. They have more people who are better trained to do the jobs than the U.S. does and more importantly to companies they are willing to do it for a lot les money. According to an article on eweek.com by Lisa Vaas one regional sales manager boasted that “offshore labor costs can be as cheap as $1 a day.”

Companies outsource to many locations while it is true that many jobs are going so called “offshore” to places like India, China, the Philippines and Eastern Europe many are not. Some companies just outsource to other companies in the same country because they may have more experience with it. Ford may only want to think about developing and assembling cars and trucks. They may want to leave all the IT worries to