Outsourcing is not Evil
Published: January 17, 2019
Let’s talk about the elephant in the room.
When you hear the word “outsourcing” or “offshoring” what immediately comes to mind?
Yes, in recent years there have been a lot of mixed views about outsourcing. Emotions run high. In fact, in some cases, the mere mention of the word or idea can be considered taboo. And companies who outsource, even though it keeps the price of products and services affordable for consumers, are sometimes ostracized.
There are many misconceptions about outsourcing that may negatively impact a company’s decision to take the step toward partnering with an offshore specialist. However, the goal of any company is to stay profitable and outsourcing can be a key factor in not only growth and stability, but even survival.
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Outsourcing is a strategic, economic tool.
And like other tools, it can be used for good or evil. In most cases, it is used for the good, and many enterprises use it to turn fixed costs into variable costs, free up capital for further investment, save the company time and money and a myriad of other reasons. The negative political effect is normally a secondary issue and is not the main intention of outsourcing.
One of the biggest misconceptions about outsourcing to a developing nation, like here in the Philippines, is that the economy of the developed nation will suffer. This is not so. Yes, money does leave the developed country every time you pay your Filipino partner. However, according to a 2003 study by McKinsey and Co for every dollar spent on outsourcing, the US gets back $1.12.
Everyone is used to the fact that goods are traded between countries. What they are not used to is services being traded. Which is basically what outsourcing is. If a good or service can be produced more cost-effectively and then imported, then it would make more sense to do so than to produce it domestically.
A study from Harvard University on outsourcing states: “There is a fundamental misunderstanding about trade in general. For years, there’s been a temptation to somehow think that trade is zero-sum, that when some country benefits from trade, we must be losing from trade.” The study also goes on to explain how the U.S. economy has benefited from outsourcing.
More jobs in developing countries build “larger middle classes and create a larger market for U.S. products in the future,” says Dan Griswold, director of the Center for Trade Policy Studies at the Washington-based Cato Institute in a Washington Post article.
No one is losing from outsourcing.
Many think of outsourcing as evil because it takes jobs away from the developed countries, however, a study by the Department of Labor showed that less than 1%of the jobs lost between 1996 and 2006 were due to outsourcing. The rest was mainly due to companies either downsizing or going out of business. So, in this respect outsourcing saves more jobs than it sends out. When faced with the decision to close up shop or outsource and keep operations going, many have chosen to outsource. In the long run, this provides even more jobs as companies continue to expand.
In The Philippines, the national unemployment rate is 5.3%, Many of the unemployed have college degrees, but live in rural areas and provinces. Eventually, they have to crowd into metropolitan areas in order to find stable work. Or they end up going abroad to work as an OFW (overseas Filipino worker).
Through outsourcing, jobs can be spread out to the provinces and rural areas which allow these Filipinos to get a good-paying job. Also, In the Philippines, many workers are contractual. Even fast-food employees. They can work extremely hard for the term of their contract, however, it makes no difference. Once the contract is up, they are out. BPO companies give the opportunity for “regularization”. Meaning they are a regular employee of the company and not under contractual terms. This type of stability allows them to focus better on the job at hand knowing as they do well, other avenues may open.
Outsourcing helps people
Let’s take away borders, cultures, and economies for a minute. When a company outsources to The Philippines, they are helping another family survive in a place where daily survival can be a struggle. These workers, even though highly skilled, are not getting rich. The wages they are paid provide enough for food, decent shelter, and transportation. There are other expenses as well, such as schooling and medical care. Basic daily living. Another benefit besides salary coming from the outsourced company is the stability of work and the ability to be able to have a decent job, and still be around their families.
It also gives them peace of mind and fulfillment where there was nothing before.
The goal of this article was not to raise any controversy or spark debate. The goal was to show how much of a positive impact outsourcing can have on both the developed and developing nation. No matter how you look at it, when you outsource with TeleworkPH, you are not only making a sound decision for your business, you are helping families have a chance at a good life.