Outsourcing is the process of subcontracting with a third-party agency or company that provides a specific service using minimal time and costs.   Organizations (clients) and suppliers enter into a legally binding contractual agreement for a specified amount of time.  The contract defines the transferred services and both parties agree to use whatever people, assets, and other resources are available to fulfill the contract within that particular timeframe. The entire process first begins with the client identifying what is to be outsourced and searching for and choosing an outsourcing supplier.  A proposal is suggested and a supplier is chosen based on location and the lowest possible cost to the client.

There are many organizations that are already utilizing outsourcing.  Call centers, customer service centers, web developers, marketers, writers, and designers (and now lawyers) are only a few already tapping into this business.

But, is it worth it?

Well, let’s talk benefits: There is a great deal of benefits, but for the sake of time, we will focus on the three more prominent benefits: cost, convenience, and service.

The cost savings from outsourcing can be phenomenal.  It lowers the overall expenditure of services to the client and reduces the scope of overhead that comes with staffing a group of people in a facility.  There is also access to lower costs generated by the wage gaps between foreign and non-foreign countries.  Additionally, outsourcing restructures expenditures so that the cost is fixed.  This eliminates variable costs or at best, keeps them predictable and to a minimum.

Outsourcing allows clients the convenience of searching for suitable service and products without much energy or effort.  One can access a wide range of businesses that provide services that were previously privy to only large corporations.  Outsourcing with suppliers can also mitigate risk management by allowing suppliers to manage their own agents or workers with minimal client interference.

The third great benefit of outsourcing is the service.  Companies can control the quality of service received.  When hiring a person using traditional methods of employment, the selections are less diverse; availability is limited either locally or nationally.  When outsourcing globally, the possibilities of finding a suitable supplier is limitless and across national boundaries.  The overall quality of candidates is improved because of the access to larger talent pools and vast skill sets.  Most often services are guaranteed because of the legally binding contract that upholds financial penalties. The time specifications also accelerate services so that production is achieved within that specified span of time.

But, is this too good to be true?  Let’s review cons:

One of the primary criticisms from consumers about outsourcing is the language barrier.  With increasing globalization of outsourcing companies, the presence of Indian outsourcing in the United States is becoming unprecedented.  The globalizing outsourcing has resulted in foreigners vying for business with unemployed Americans and having access to and handling personal information.  Clients will select the best and final offer; however, when developing countries offer services and products at less-than-competitive (i.e. dirt cheap) prices, it really leaves little to no negotiating room for American suppliers. Recently, it was discovered that a growing number of legal firms outsourced some costly legal work to India.  This raises questions about ethics.  Some paralegals cite concerns about confidentiality, unauthorized practice of the law, and also language barriers.

Consumers believe that outsourcing damages local labor and that it affects jobs and individuals who face unemployment or job displacement.  Competition between the U.S. and other nationalities create public controversies and foster an atmosphere that may not adhere to the laws, more specifically labor laws.  And, if laws are considered, do not specify which nationality sets the guidelines when client-supplier relationship crosses national boundaries.

Outsourcing – particularly online – can also diminish human contact and promote stoic personalities and undemonstrative relationships.  We see this especially with call centers and customer service centers.  Agents can be aloof and uneducated about services and products, making the customer experience of low quality. This only exasperates consumers particularly when service is outsourced from nationalities where the language is different. The quality is also questionable when call centers service the public in countries other than their own.  Language, accents, jargon, and colloquialisms are different depending on where one lives; therefore, communication between agents and the public proposes a challenge.  The genuineness that is often seen from human interaction is missing and does frequently lead to misunderstandings and miscommunications.

Other disadvantages of outsourcing can include, staff turnover, fraud, and dealing with security issues.  Turnover is higher under an outsourced business and company skills are lost because of retention. Fraud is also a specific security issue more likely a possibility when outsourcers are involved.  Consider for example credit card theft by credit card cloning. In April 2005, four Citibank customers were victimized by theft when call center workers acquired the passwords to their and transferred money into to their own accounts opened under pseudonyms. Citibank did not find out about the problem until after the customers noticed discrepancies with their accounts and notified the bank.  In 2004, outsourcing became a popular political issue in the United States during the U.S. presidential election. The political debate centered on outsourcing consequences for the domestic U.S. workforce and how this affected paying taxes.  Outsourcing was portrayed as the killer of good-paying American jobs and deemed companies who used outsourcing the “Benedict Arnold CEOs”.

So, what about the future of outsourcing?

According to outsourceworld.com, as time goes on and challenges continue to present themselves, there will be an upward trend in outsourcing on a global scale.  However, we can also expect an upward trend for the U.S. economy as countries such as China and India are creating offices that will generate jobs and capital back into the U.S. economy.  Clients and companies must continue transforming their business and creating better jobs for everyone.  In the meantime, integrity and honesty must come to the forefront to protect the interests of both the client and supplier.  As a people, Americans must not continue wearing myopic blinders, but rather see the broader picture and recognize quality local talent and be more willing to utilize the skills from that talent.