It doesn’t matter what the industry is, there’s always more work to do than time to do it, that is where outsourcing comes in.

This means that there is always something lacking, always more work to be done, and new companies are always falling behind their expectations and deadlines.

One of the most insidious parts is that it leads to massive stress. According to business coach Michael Hyatt, 45% of entrepreneurs are stressed.

So, what’s an overworked entrepreneur to do?

There are plenty of answers, and not every one works for every type of entrepreneur. But the answer more and more business owners are turning to is a simple one: outsourcing.

• What is Outsourcing
• What is Outsourcing in Business
• When Should You Outsource For Your Business
• How Does Outsourcing Help a Business Grow
• How do You Outsource a Business
• Advantages of Outsourcing Parts of Your Business
• Disadvantages of Outsourcing
• Outsourcing Examples
• How to Offer Outsourcing Services
• Consequences of Outsourcing
• Does Apple Use Outsourcing
• Does Google Outsourcing
• How Does Outsourcing Reduce Cost
• Is Job Outsourcing Good or Bad For Developing Countries?
• What Companies Hire Immigrants

What is Outsourcing

The practice of having certain job functions done outside a company, such as answering service for physicians instead of having an in-house department or employee handle them. Many functions can be outsourced to either a company or an individual that takes this task off the hands of the business owner. 

What is Outsourcing in Business

It’s the practice of sending certain job functions outside a company instead of handling them in house. More and more companies, large and small, are turning to outsourcing as a way to grow while restraining payroll and overhead costs. How can you make it work for your business?

First, make sure the company you’re hiring can really do the job. That means getting (and checking) references. Ask former or current clients about their satisfaction with the client. Find out what industries and what type of workload the firm or individual is accustomed to handling. Can you expect your deadlines to be met, or will your small business’s projects be pushed aside if a bigger client has an emergency?

Also, make sure you feel comfortable with who will be doing the work and that you can discuss your concerns and needs openly. Ask to see samples of work if appropriate (if you’re using a graphic design firm, for example).

One outsourcing option is to hire independent contractors. Instead of hiring an in-house bookkeeper, for example, you might outsource the job to an independent accountant who comes in once a month or does all the work off-site.

Independent contractors can be more flexible and lower in cost than outsourcing firms. As with outsourcing firms, however, before hiring an independent contractor, make sure the individual you use can do the job.

If your outsourcing needs are handled by an individual, you’re dealing with an independent contractor. The IRS has stringent rules regulating exactly who is and is not considered an independent contractor.

The risk: If you consider a person an independent contractor and the IRS later reclassifies him or her as an employee, you could be liable for that person’s Social Security taxes and a wide range of other costs and penalties.

When Should You Outsource For Your Business

Before outsourcing your organization or project, ask yourself these three questions.

1. Will it propel my business forward?

As Deloitte’s 2018 Global Outsourcing Survey highlights, controlling costs is still a major benefit of outsourcing, but the motivation behind the decision to outsource has changed. Now companies opt to outsource as a way to work with partners and integrate services that they couldn’t provide on their own.

For entrepreneurs, especially, outsourcing can be the key to propelling their startups forward faster and more effectively than they could do alone or with a small in-house team. You can even outsource product development. For instance, when Alex Turnbull wanted to launch Groove, he realized he lacked the technical expertise to build the SaaS product. He outsourced the online customer support platform’s entire early development so he could get his idea off the ground.

2.  Will it boost my team’s capabilities?

Outsourcing can amp up your team’s skill set. For instance, say your marketing team can check off nine out of ten industry expertise boxes but lacks understanding of one area, such as graphic design or video production. By outsourcing this capability, you can complete the ecosystem. Whether it’s IT, accounting, marketing or any other function that needs help, building it up through strategic outsourcing helps everyone else excel.

The IT function offers an excellent example. With the exception of IT companies proper, most businesses don’t specialize in the types of technologies they depend on.

To establish and manage any program, Christine Alemany, chief growth advisor for Trailblaze Growth Advisors, says that “you have to have much more than a cursory understanding of the technologies involved in the entire ecosystem.” Outsourcing with a partner that has this understanding will help your business thrive.

3. Will it make my team more efficient?

Outsourcing is not about just handling areas in which you don’t excel. Sometimes you should even outsource some of your core competencies, too.

By outsourcing some tasks that fall under the expertise of your team, you can free up time for in-house departments to flex their efficiency and productivity muscles. Outsourcing can streamline a process or help your team complete a time-consuming project while not abandoning all of their daily tasks.

For instance, with outsourcing’s help, Penske Truck Leasing, which leases equipment and provides logistics services, redesigned and centralized its back-office operations to better leverage a global delivery model. The company’s administrative and finance teams outsourced tasks to Genpact transition experts, leaning on them for some of the research and process mapping required to determine how operations should be redistributed.

How Does Outsourcing Help a Business Grow

Outsourcing enables small- to medium-sized businesses to pay less for non-core functions and still have access to experts without the need to employ them themselves.

Outsourcing lets small- to medium-sized businesses:

• Focus on core business functions: Outsourcing essential but non-core business functions, like payroll, marketing or R&D, frees up resources so staff can spend more time focusing on the things that add value.
• Access industry experts: A smaller firm can tap into a specialist’s industry expertise at a fraction of the cost of hiring an executive full-time.
• Decrease overhead: Insourcing requires overhead such as office space, salaries and benefits. When compared with these ongoing overhead costs, outsourcing can save money.
• Ramp up new projects quickly: If a company is starting a new project, an outsourced provider will have the resources in place to hit the ground running quickly, where insourcing could take weeks or months to hire and train employees.
• Have staffing flexibility: For industries, like retail and construction, which experience seasonal and cyclical fluctuations, outsourcing allows staffing up when needed, without committing to employees on an ongoing basis.

If you decide to outsource, look for outsourcing companies that allow you to maintain access to data, analytics and learnings, avoid hidden costs and appoint an in-house manager for outsourced staff.

Also, plan to have enough time for vendor selection, contract negotiation and the onboarding process when outsourcing jobs.

How do You Outsource a Business

1. Identify the best approach to outsourcing by understanding your motives

Before you begin looking into outsourcing, it’s important to identify your approach. Are you looking to get simple work off your hands, save on costs or hire a specialist to sort out a specific area of your business?

While you can jump right into searching for talent, it helps if you know what your goals are and how much would make sense to invest. The last thing you want to do is waste money simply because you had undefined expectations.

Next, decide on an hourly rate or a set project rate. Setting a fixed price for a project ensures you won’t have to worry about going over budget your first time outsourcing.

If you’re having trouble finding a round number, try breaking down your task into hours and then setting an hourly price that you can then add up.

While fixed project prices are good, don’t fear hourly rates!

Hourly rates can be great for outsourced teams working in customer service or for an individual who helps with the books a few hours a week.

Just make sure to monitor the hours worked using trusted time tracking software like Hubstaff to ensure that you’re only paying freelancers when they’re working.

2. Clarify project specifications and expectations

Once you know why you’re outsourcing and what your approach will be, it’s time to make that into project specifications and defined expectations.

One of the first things that you likely already have an insight into from step one is the length of the project. If you’re looking to outsource bookkeeping, for instance, it’s likely to be a long-term contract.

However, if it’s a one-time project, such as web design, it’s a good idea to have a deadline by when you’d like the project completed. Maybe you’re attending an event and would like your website up by then. Be sure to clarify these deadlines, and the importance of them, to any contractors.

In some situations, you’re doing things without any time pressures. However, it’s still a good idea to come up with some sort of deadline to avoid the project dragging along for a long time.

Once you have your deadlines and timelines set, you will need to clarify the exact expectations from the freelancer or company you will work with.

Many freelancers include a number of revisions in the estimate, so make sure you discuss this upfront.

Lastly, be sure to specify exact deliverables. This is especially important for fixed cost projects. Specify what exactly you’re paying for and what the contractor will have to deliver to conclude the project.

3. Where to find outsourced talent

Once you know what you need and why you need it and have the details specified, you’re ready for finding the person or company you will work with.

As you’d expect, there is no shortage of places to find outsourced talent. Below are just a few of the many options available:

• Hubstaff Talent: A completely free talent platform for job seekers and prospective employers. Find hourly talent from a range of industries as well as full-time remote staff. There are no fees for posting jobs, hiring talent, or sending payments. Just thousands of talented professionals with clearly stated expertise and rates for you to browse.
• Upwork: This platform is another resource to find all manner of freelancers. Here you can hire individuals or teams and pay on an hourly or per project basis. Vetting candidates is made easy as each applicant’s profile has a star rating (candidates with a rating of 4.5 or above are highly recommended) along with information on total Upwork hours worked, and profile history.
• Outsourcely: Outsourcely is also another platform to easily find and connect with talent. It’s easy to find, hire, and work with reliable, vetted remote workers from over 130 countries. This is great for employers who are looking to build sustainable working relationships and dedicated remote teams. How does Outsourcely work? Search remote workers by skill or by posting a job and contact candidates immediately using real-time private chat, browser to browser video and voice calling, video and voice messaging or just regular email. This makes hiring fast and easy.
• Fiverr: This is the perfect place for those looking to outsource on a budget. As its name suggests, jobs start at just $5. You can browse from jobs offered or post your own.
• If you want a local service because the person will need to travel to your office for some parts of the work, or because you want to support the local economy, you can still use any of the internet platforms and just specify the location of the freelancer. Alternatively, a Google search might do it and there’s always the option of a local online jobs board or big classifieds sites like Craigslist.

There are many sites and services out there, so take your time and select the one that’s right for you.

4. Write a good job or project description

The job description is an opportunity to not just describe the job details and set expectations, but also weed out unqualified candidates by showing high expectations from the start.

Let’s imagine that you need someone to write blog posts, and you decide to look for them on popular freelance websites or job boards. We will compare two job posts so that you can see the difference between an effective and ineffective job post.

An ineffective job post

“I am looking for someone to write blog posts for my fitness blog at least twice a week. The blog posts need to be informative and your English needs to be good.”

An effective job post

“I am looking for a professional writer who will write at least two blog posts weekly for my fitness blog. I will only accept native English speakers. You must have a portfolio so that I can check out your previous work.

This is going to be a long-term job, so applicants will be tested for competence. The client will expect discipline, organization, and courtesy. Please do not apply for this job if you don’t think you can meet these standards. Thank you!”

Guess which job post is going to attract highly qualified article writers? The ineffective job post will attract too many low-skilled contractors that hope to land any kind of job.

This is important, as manually screening all the applications to weed out low-skilled applicants from the developing nations can cost you a lot of time.

5. Interview and test your candidates

Once you’ve shortlisted some potential candidates, don’t skip the process of checking their references, portfolios, giving test projects, and interviewing them.

The interview doesn’t have to be as formal as for a job interview, the goal here is for you to ask any questions or doubts you might have with outsourcing to this specific person.

For them, it’s a chance to ask any questions on the project. A good specialist in their field will almost certainly have some.

A good approach is to issue a test to all candidates before you hire them. This can be as simple as writing a few lines of code or a paragraph describing your website.

It may sound unnecessary, but a simple test can help weed out bad candidates or ones who won’t be a good fit. Just make sure to compensate applicants for their time so that you’re not requesting free work.

Lastly, if you offer low rates don’t expect amazing work. While the lowest offer may not always be the worst, don’t just pick a freelancer or company solely because they’re the cheapest.

6. Manage and operate your outsourced team members

Once you have found your outsourced employee, set up regular chats with them over Skype or have weekly email check-ins to ensure that everything is running smoothly and on schedule.

If you don’t want to be managing your outsourced team members, that’s fine. Just be sure that you specify that in the second step of this list, and look for clear signs of reliability in the interviewing process.

A good and reliable outsourced employee will find it instinctive to regularly update you on the work done and any setbacks and generally keep you in the loop on everything. Just don’t expect this from the cheapest option.

When outsourcing, it’s always a good idea to implement a time tracking solution of some sort to keep an eye on the costs and how freelancers are spending the time.

Advantages of Outsourcing Parts of Your Business

The businesses you outsource to may be independent consultants or other large corporations. No matter the size of the business you work with, contracting out operational tasks can provide a variety of benefits.

From sole proprietors to large corporations, businesses of every size can use outsourcing to help their company grow and expand while keeping expenses as low as possible.

Focus on Core Activities

The back-office operations of a company tend to expand during periods of rapid growth. This expansion can tie up your human and financial resources at the expense of the core activities that made your company successful in the first place.

For example, let’s say your company lands a large contract that will significantly increase the volume of purchasing in a short period of time. By outsourcing purchasing responsibilities, you free up personnel to focus on the contract itself. 

Maintain Lower Costs

Sometimes the expense of purchasing equipment or needing a new location can be prohibitive. In these cases, it’s more cost-effective to outsource than to expand operations internally.

If the growth of your business results in an increased need for office space, try outsourcing simple operations such as telemarketing or data entry rather than moving to a new location. It might cost far less than the price of expanding, and it is both more efficient and less expensive than relocating. 

Outsourcing can also lower costs by reducing the expenses associated with bringing on new employees, such as:

• A hiring search
• Onboarding
• Healthcare and other benefits
• Payroll taxes
• Increased need for workers in management and HR positions

Working with contractors rather than employees can minimize these costs, allowing your business to get the same amount done for less.

Promote Growth 

The overhead costs of some operations are extremely high, but you might want to offer them to satisfy customers, expand your business model, or compete in the marketplace. Outsourcing can be a good option if the cost of expanding to handle those operations yourself is too expensive, would take too long to effect, or would create inefficiencies in your business model.

For instance, your small doctor’s office wants to accept a variety of insurance plans, but one staff member can’t keep up with all the different providers and rules. Outsourcing to a firm that specializes in medical billing will cost less than hiring additional skilled staff or training existing personnel, while still increasing the benefit to your customers.

Maintain Operational Control

Operations with rising costs should be considered for outsourcing. Departments that might have evolved over time into uncontrolled and poorly managed areas are good candidates. An outsourcing company can often bring better management skills to your company than what would otherwise be available without significant restructuring.

For example, let’s say your IT department has too many projects, not enough people, and a budget that far exceeds its contribution to your organization. An outsourcing agreement with an IT contractor will force management to prioritize their requests, bringing projects and spending back under control.

Offer Staffing Flexibility

Outsourcing allows operations or departments that have cyclical demands to bring in additional resources when they’re necessary. The outsourcing company can then be released when things slow down again, maintaining a company’s flexibility.

Provide Continuity and Risk Management

Periods of high employee turnover can add uncertainty and inconsistency to a business. Outsourcing provides a level of continuity to the company while reducing the risk that a substandard level of operation could bring, even over a short period of time

For instance, your HR manager is on extended medical leave and her administrative assistant is leaving for a new job. Outsourcing the human resource function reduces risk and allows the company to keep operating while the manager is unavailable. It also gives you time to hire a new assistant without rushing the decision because the office is understaffed.

Develop Internal Staff

A large project can require skills that your staff does not possess.⁴ On-site outsourcing, where you bring in contractors to operate at your own location, can provide you with the people who possess the skills you need while your people work beside them to acquire a new skill set.

Disadvantages of Outsourcing

Look at each one of the outsourcing disadvantages listed below and decide what impact that item would have on your business and its operation. If the outsourcing disadvantages outweigh the advantages of outsourcing, then you should avoid outsourcing those operations.

Keep in mind that some functions or departments lend themselves much easier to being outsourced. Hence, what could be a disadvantage in one department may be an advantage for another.

Loss of Managerial Control and Possible Quality Issues

Whether you sign a contract to have another company perform the function of an entire department or single task, you are turning the management and control of that function over to another company.

Your outsourcing company will not be driven by the same standards and mission that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours.

The outsourcing company will be motivated by profit, versus specific metrics that you would have in place if the function stayed in-house. Since the contract will fix the price, the only way for the contracted company to increase profit will be to decrease expenses.

Decreasing the expenses that an outsourcing company has may be trading off quality. In addition, you will lose the ability to rapidly respond to changes in the business environment because there will now be an extra layer of people and processes to work through.

Hidden Costs

You will sign a contract with the outsourcing company that will cover the details of the service that they will provide. Anything not covered in the contract will be the basis for additional charges. Also, there will be legal fees to be paid in order to retain a lawyer to review the contracts and make any required changes. 

Keep in mind that when working with an outsourcing company that they are the experts in this area. If they are good at what they do, they have many contracts and therefore much more experience in this area of contracting than you.

It is their experience with this type of contracting, and your lack of experience, that makes it easy for you to miss hidden costs.

Threat to Security and Confidentiality

Intellectual property and confidential data must be protected when non-company employees are being used in an outsourced capacity. If you have payroll, medical records or any other confidential information that will be transmitted or used by the outsourcing company, there is a risk that the confidentiality may be compromised.

If the outsourced function involves sharing proprietary company data or knowledge such as product drawings or formulas, there need to be proactive safeguards in place to protect this information. 

Play it safe an insist that the outsourcing company sign a protective clause in the contract or as a separate non-disclosure agreement. Ensure that the contract language is strong enough to discourage purposeful misuse of essential company data.

A Tie to the Financial Well-Being of the Outsourcing Company

Since you will be turning over part of the operations of your business to another company, you will now be tied to the financial well-being of that company. Due diligence and a review of the company’s financial statements is usually a good predictor of the health of the company. 

One of the worst things that can happen as a result of outsourcing is that the other company may underperform financially and therefore they default on their contractual obligations. The absolute worst scenario is that the outsourcing company files for bankruptcy and seeks protection from its creditors.

Impact on Employee Morale

The company’s employees could react (and retaliate) to outsourcing one or two key functions/departments in the company. To these employees, the act of outsourcing could signal that their job is also at risk and will eventually be eliminated by being given away to the outsourcing company. 

The management team needs to take care in how the message about outsourcing is delivered to the company employees. There is no such thing as over-communication when major changes such as outsourcing departments or company functions are concerned.

Outsourcing Examples

Outsourcing strategies are used, for example, in the customer service, accounting, tax consulting, IT, and marketing departments.

Examples of possible outsourcing strategies:

• Customer service: A company relinquishes the task of customer service to a specialized company. Often call centers take over a certain call capacity for a fixed price.

• Marketing: A company outsources the support of social media channels to an external service provider (e.g. an agency).
• Manufacturing of products: For many fashion companies it is too expensive to produce clothes in the US. Therefore, they often opt for production in Asia. After completed production, the clothing is then shipped to the United States.

These are just a few typical examples of outsourcing. In practice, a company today can outsource every step of its operations, whether in manufacturing or the provision of services, to an external contractor. Thanks to the networked world, it no longer matters whether the foreign company is located in the neighboring village or on the other side of the world.

How to Offer Outsourcing Services

More and more businesses are finding freelancers to outsource their work to these days, and as a freelancer, you need to be the one convincing your clients to outsource to you.

1) Show them you know their business

First, never forget the personal touch. Your clients will appreciate working with someone who is an expert in their field, and who has done the background research necessary to really elevate their business.

Research a lot and find out how your client’s business ticks – what is their philosophy and their aims? 

Think about how you can help them achieve their goals and maybe look at possible aspects in your field that they are doing wrong. 

If you are an expert on, say, Web Design Projects, don’t be afraid to tell the clients straight to the face where you think their website is not working well.

2) Spell out how they are going to benefit from your services

Once you have identified the inner workings of your potential client, you need to tell him how exactly your work will be beneficial. Offer concrete measures that will give them quantifiable results, for example:  

“Doing X and Y, will optimize your site and bump up your results in Google Search.”

Most businesses will already know why they need to outsource work to freelancers, but you can go one step further and offer solutions to problems they hadn’t even realised need addressing. If you can convince a company that a short-term investment in your services is going to be profitable for them in the long term, few clients will refuse.

3) Give them samples

One of the best ways of convincing a client of your expertise is to show them.This is a universal marketing strategy and, as such, can be applied to freelancing as well. Giving the client one example of your work can be more powerful than 10 paragraphs of you saying how good you are. In that case, actions really do speak louder than words.

As a freelancer, having a strong portfolio with examples of your previous work (preferably in the niche of the business you are targeting) is one of your most essential tools when finding new clients to outsource their work to you.

4) Show them you’re professional

It is important to convince clients – especially ones who have never dealt with freelancers before – that you are going to do your job professionally. Professionalism should show in every aspect of your work: how you contact them, the way you address them, how your social media presence looks, etc.

If you have references or testimonials, this is a great bonus as well. Hearing from other satisfied customers is often the best way to let potential ones know that you are trustworthy. Don´t fall into common outsourcing mistakes!

5) Reduce the risk factor

Clients who have not worked with freelancers before are going to be worried most about the risks that come with working with outside sources, which can include: 

• Paying too much for a low quality of work
• Paying a freelance and never receiving any work
• Poor communication
• Missed deadlines

Really, the list is endless – but your main priority is to show that those risks aren’t relevant when working with you.

The best way to do this is by replying to a job advertisement with a direct response that is individual to that client (no copied and pasted blanket responses), with links to testimonials and to your portfolio.

Keep your entire business relationship professional, from agreeing to a contract if that makes the client more comfortable, to agreeing a proper payment transaction process before you begin any work.

Eliminating all of these risks make it far more likely that a client will feel comfortable working with a freelancer for the first time.

6) Keep it short and sweet

Although the tips above might seem pretty extensive, they can be boiled down to a very short email. That should be your goal.

If you want to convince a client to outsource, you are competing with various other distractions and things he or she has to do, not even speaking about the short attention span when it comes down to emails from strangers.

Get to the point quickly and efficiently to increase your chances of being seen.

7) Address Their Budget Worries

For a client who has never outsourced any work before, their budget is always going to be a key concern for them.

It’s important to be budget-sensitive and work with your client while not sacrificing your own rates. What’s more, you should highlight the cost savings the client is making by hiring an outside freelancer as opposed to a full-time member of staff.

Monitoring your competitor’s prices and market averages is also useful to ensure you are charging a fair rate to both parties involved.

8) Meet Your Deadlines 

Ideally, once you start working with a new client you want them to continue outsourcing their work to you. The best way to do this is to make their work a priority – these means meeting deadlines and being available to address any issues and problems, especially in the early stages of your working relationship.

Consequences of Outsourcing

as with most things, outsourcing isn’t all good; it does cause some unintended negative consequences.

Outsourcing Lowers Barriers to Entry and Increases Competition

While increased competition is encouraged by free markets and generally benefits consumers, it can hurt businesses that can’t keep up. Outsourcing allows new entrants to industries where labor would have been too expensive otherwise.

A startup company seeking to manufacture electronic devices might not be able to get off the ground if it had to hire American factory workers, but can now easily find eager and cheap skilled laborers abroad. Barriers to entry that once existed due to the capital requirements needed at the startup phase can be greatly reduced. 

Early movers in an industry to outsource will have a competitive advantage initially, but that advantage will continue to be eroded as more competitors follow suit, and newcomers are incentivized to join. Once everybody is participating, the initial advantage is removed completely.

Outsourcing also encourages new competition by causing fragmentation and disintegration of the supply chain. In other words, new entrants can arise to exploit the fact that manufacturing may take place in a different geographic region from product design and customer support in yet another region.

Each part of a business is effectively subcontracted out, and that means that any new company can hire those same contractors (or competitors of those subcontractors) and produce identical items for around the same cost as the big players.

Outsourcing Erodes Company Loyalty

If a worker knows that their job may be outsourced to cheaper foreign labor at any given moment, they may lose confidence in their employer and become discouraged.

As outsourcing has grown from unskilled jobs to include administrative and intellectual positions, even managerial level employees cannot be certain that their jobs are safe and secure. Workplace satisfaction and worker productivity can be negatively impacted.

Additionally, if an employee, or group of employees, decides that they are being treated unfairly or are being underpaid, they can leave to start their own company in direct competition with their former employer. This possibility is more likely than ever before because of outsourcing’s lower barriers to entry.

Consumers can also be turned off by outsourcing. The most ubiquitous case is the outsourcing of customer support or technical support to places like India. When customers hear a foreign accent answer their call to an American company, they may lose trust in the company and could even blame that company for eliminating American jobs.

The situation becomes even more sensitive when customers have to share medical or financial information with strangers overseas. Customers may band together to boycott these companies or spread negative sentiments through social media.

Outsourcing Can Eliminate Jobs From the Domestic Workforce

While there is much debate as to whether or not outsourcing causes unemployment or actually adds jobs to the economy, it is obvious that it does eliminate certain kinds of work. Presumably, those workers who lose those jobs go on to get better jobs in new industries or through better training and education.

Manufacturing jobs are a prime example. Today, much of what is made by American companies actually gets produced in foreign factories. While it is true that U.S. manufacturing as a contributor to gross domestic product (GDP) has not fallen by much, the types of manufacturing jobs in America today are not the same as they used to be.

Today’s U.S. factory jobs are dominated by information technology, robotics, precision machines, and engineering. The low-skilled jobs involving repetitive manual labor have been outsourced either to cheap labor abroad or to technology.

As a result, entire towns and communities that relied on assembly lines and factories have become virtual ghost towns. The so-called Rust Belt is a prime example of this phenomenon. It refers to the staggering economic decline, population loss, and urban decay caused primarily by shrinking the domestic industrial sector throughout the Northeast, Mid-Atlantic, and Midwest.

Outsourcing Affects Insourced Countries

The rise of the Chinese middle class in the past few decades has been attributed, in part, to its rise as a global exporting powerhouse. But as more work is outsourced to that country, Chinese workers will begin to demand higher pay. The ripple effect predicts that China’s competitive low-wage advantage will eventually be eliminated, and the boost to economic production that resulted will also depart.

Outsourcing also takes labor out of the workforce of a country and sets laborers to work doing tasks that may not be critical to their own country’s development or growth, but pays better nonetheless. People may be enticed to leave agrarian or cottage industries to earn more money in a city as a call center operator.

And what happens when there are no more cheap labor regions to exploit? Companies may then turn to technology to replace workers causing unemployment of unskilled labor abroad as well as at home.

The influx of investment from abroad, especially for manufacturing, can also lead to a glut of factories that spit out pollution and carbon dioxide into the atmosphere, negatively affecting the health of workers and nearby communities. China is now exporting CO2 credits to neighboring countries, such as Mongolia.

Does Apple Use Outsourcing

Apple outsourced plenty of work to Indian IT services companies.

Apple’s outsourcing strategy it’s evident when you read the back of your iPhone – Desing by Apple in California. Assembled in China – meaning that Apple’s products are designed in the US, yet software and hardware engineering are conducted globally. Software audits and performance testing are the most commonly outsourced services for Apple.

For manufacturing, it has been working with Foxconn, a company with bases in both China and the United States. This seems to be for practical purposes as well as production costs.

Does Google Outsourcing

“Outsourcing is not something that’s new to Google … Google sees greater value in outsourcing, as it is more cost-effective,” a spokesperson for one of the outsourcing firms said.

Back in 2011, Google announced it would use outsourcing for a department that is now responsible for one of its top-grossing products, AdWords. AdWords phone and email support were outsourced to 1,000 reps all over the world. And in 2016, it moved to outsource more IT work. Google teamed up U.S.-based Cognizant, which has branches in India for development.

However, Google has changed its strategy on outsourcing; the company is now increasingly starting to outsource non-core tasks of its business, such as IT management, software development, and maintenance to IT services firms.

How Does Outsourcing Reduce Cost

1. The high level of expertise

Usually, when you’re outsourcing your business processes, you will do so for a niche organization. It means that it will have prior experience in handling such operations. So, you will get to experience employees to handle your work. The level of expertise will also be on the higher side. It means that your work will be done in a much efficient and diligent manner. If you want to hire employees with the same level of expertise in your native country, the cost would be very high. However, since outsourcing is often done in third world countries, you can get such a level of expertise at a fraction of the cost.

2. Reduces capital requirement

There is an immense difference between salaries in some developed countries and developing countries. Many countries like the Philippines, have a large working population, which enables you to hire employees at affordable salaries. Due to this very reason, when you opt for offshore staffing in the Philippines, you can save a lot of money. You can hire a few employees or outsource the bulk of your work, which will help you save even more capital.

Another way in which you can reduce your capital requirements apart from the salaries is that you will not have to make arrangements for those employees. They will likely work from their home or the office of the staffing organization.

You need not have desk space or sitting space for them in your office. It will help you save an immense amount of capital. Thus, outsourcing can lead to tremendous savings due to these two reasons as well.

3. No training and recruitment expenses

When hiring an agency in a Third World country to outsource to, you will not have to worry about recruitment or training expenses. The offshore agency will do the training and recruitment.

You can focus on your work and outsource the task at hand rather than spending money on finding recruits. It not only helps you reduce your expenses but also makes it easy for you to concentrate on your business. The benefit which we are talking about now has a dual-pronged advantage.

4. Quicker turnaround time

Most of the employees at staffing agencies are well experienced. They might be experienced in your niche as well. That is why the turnaround time is quicker.

Moreover, since you work in different time zones, you can be sure that even when your offices are closed, they would be working. The main advantage is that by the time, it is office hours in the Western Hemisphere; the working day of the Eastern Hemisphere is almost over.

When you get into office, chances are you will have the work done. It means that if you plan correctly, you can reduce your turnaround time.

With the reduction in turnaround time, your resources will be efficiently utilized, which will, in turn, reduce the need to hire more employees. When your workforce is leaner, it is easy to save money.

5. Easy to reduce the workforce

When having full-time employees in your office, it is tough to let them go. However, when outsourcing, you can reduce your workforce as per your business. It will allow you to increase your margins and reduce the fixed expenses. It will also free up capital for other uses.

Most of the staffing agencies work on short-term contracts, which makes it easy for you to reduce your workforce if need be. Thus, you can handle the business cycles in a much better way.

How do Consumers Benefit From Outsourcing

Lower Prices Ensue

Offshore outsourcing is used by businesses to reduce costs. Most often, all or part of those cost savings go toward a reduction in price to the consumer so that the outsourcing company can remain competitive in the given marketplace. Accordingly, such outsourcing makes products cheaper and therefore benefits the consumer.

Is Job Outsourcing Good or Bad For Developing Countries?

For more than 20 years, companies in developed nations have increasingly outsourced parts of their business processes to developing countries like India, the Philippines, Indonesia, and others.

This phenomenon has given rise to what is now known as remote working or, in millennial speak, being a “digital nomad.” This is because most outsourced or remote workers today typically have their own home offices set up at their convenience or can be seen lugging their laptops in cafés or wherever they go.

Outsourcing is a welcome concept not just for companies looking to outsource, delegate or sub-contract business activities but also for third-world nations like India and the Philippines—the two English-speaking Asian countries whose talent pools are being tapped for outsourcing jobs.

Outsourcing has positively addressed the growing unemployment rate in developing nations and developed the labor forces of these countries for specific industries. 

In the Philippines, the outsourcing industry has become the economic lifeline for almost the entire nation. Over 500,000 Filipinos are employed by business process outsourcing (BPO) companies and BPO’s are now the top foreign exchange earner in the Philippines along with foreign exchange remittances, bringing in close to US$ 20 million (PhP 1 billion) total revenue.

Metro Manila, the country’s capital region alone, is now a growing hub for many outsourcing sub-industries like the call center industry, and because of this, the Philippines is now known as the Call Center Capital of the World, with 16% to 18% of the global market share.

As for India, Bangalore alone is home to over a hundred thousand tech workers, many of whom are employed by US companies. Across the nation, 1 million people are working for US-based companies like GE Capital and Microsoft.

American technology companies have been outsourcing to India for years. In fact, tech giant IBM is employing 130,000 people in India, which is already one-third of the country’s workforce, and is continuously shifting some of its critical business operations to the South Asian nation.

Outsourcing can provide people in developing countries with well-paid jobs that might not be available to them otherwise. These jobs are not just low-end, low-skilled jobs that were created to support minor business functions.

Outsourcing companies are not merely looking for cheap labor; they are seeking professional and skilled individuals who can support mission-critical aspects of the business.

Outsourcing also provides workers with a sense of pride and fulfilment knowing that they have a job that can support their families. Outsourced jobs are important to the people who get them, as most of them are college graduates who feel that they could never get jobs that could pay them US$400 to US$500 a month—the starting salary for most call centers—without this kind of opportunity.

They are not only given employment opportunities but also a chance to climb up the career ladder. This helps create young workers that are confident about themselves, dignified, and optimistic.

The many job opportunities that Outsourcing Angel has given to our virtual assistants have helped them gain the time and freedom to be with their families for important milestones and have helped them gain much financial freedom as well.

From building their dream homes, to spending quality time with their families, to having an online career, this opportunity to work from home is much cherished and makes an immensely positive impact on the lives of our angels. 

Outsourcing, in general, presents a bright future for India, the Philippines, and other developing  countries—enriching the overall economies and strengthening the economic well-being of those who are employed by outsourcing companies. Does outsourcing help developing countries? Yes, it most certainly does!  

What Companies Hire Immigrants

American-based companies from Microsoft to Ernst & Young are known for hiring skilled labor from outside the U.S. on H-1B temporary work visas. But a new, sweeping border security and immigration bill in the Senate (S.744) promises to reduce the headcount of foreign workers they can hire by at least 40,000 from current levels of 110,000 annually.

Famous names like Bill Gates have been calling for more H-1B visas for years now. Industry leaders at the big outsourcing firms, the vast majority of them Indian, all say that the U.S. tech worker doesn’t always have the required skill set. Washington does not believe them.

According to MyVisaJobs.com, a news and information portal for high-skill labor worldwide, these are the top 15 importers of knowledge workers and what they are paying them, on average. The data was compiled from a mix of Internal Revenue Service, U.S. Department of Labor and the U.S. Census Bureau.

Google is ranked No. 15 within the top 100 firms

Conclusion

When you outsource, you can focus your time, attention and resources on your company’s core competencies–and spend your time setting new goals and finding ways to achieve them.