IT Outsourcing: Definition, Pros and Cons
In the 1990s, the global phenomenon that was the internet began to change the world in many ways. One of the biggest changes was in the way that people worked. Many companies in the advanced countries like the USA and Europe began to assign jobs electronically to ‘telecommuters’ who did the job on their PC at home and sent back the end result the same way. This worked for the mutual benefit of both the companies and employees. But as the labor costs and other costs, such as social security, taxes and Medicare, ate into the profit margins of the US companies, they began to look elsewhere to reduce the costs. And their eyes fell on developing countries India and China which were just opening up and had a large pool of skilled IT workers that they didn’t know what to do with. This was the beginning of IT outsourcing that soon turned into a multi-billion dollar business.
Outsourcing must not be confused with off shoring as these two words stand for entirely different things. Outsourcing means contracting out a business function or process to a company or worker based in another country. For example, when a software company in the US gives a software company in India a contract to build a component of a computer program, it is known as IT outsourcing. In this case the component that has been contracted out becomes the complete responsibility of the foreign contractor. Usually companies contract out only non-core components of their business to foreign contractors so that they can concentrate on the core components. Besides ensuring the quality of the final product, this ensures that the company’s secret remains safe with the company. Off shoring, on the other hand, means relocating a function or a process to another country. For example, when a US based company shifts a part of its manufacturing process to China by opening a plant there, it is called off shoring.
Many US and European companies outsource everything from data entry to call centers to software components and web contents because it helps them cut cost on high employee salaries in their own country. In the US, companies are also required to dole out social security, medical care, taxes and safety protection for domestic employees. With foreign-based contractors, they are totally free of these obligations. Also, educating and training in the US costs a fortune, while the same costs only a fraction of what they would cost in the US. And, of course, foreign contractors can always be dropped if they fail to provide quality work or are in breach of contract. The same cannot be said about domestic employees.
IT outsourcing is not only beneficial to domestic companies, it is also beneficial to foreign countries because it provides employment to the large number of university graduates who would otherwise be unemployed, and because it brings in the much needed dollar. This is what riles the opponents of outsourcing in the US who accuse companies that outsource IT jobs of taking the job away from domestic worker because of their greed. But what must be understood is that by making products and services more affordable, these companies are actually making life easier for domestic consumers.
Weighing in on the Pros and Cons of IT Outsourcing
When the internet became a global phenomenon in the late ’90s, many US and European IT companies discovered that they could cut down cost by almost half by outsourcing the non-core components of their production and services to companies in the less developed but rising Asian countries like India, China and the Philippines. This resulted in a huge profit margin that made the shareholder happy and clamoring for more. Thus began the trend of IT outsourcing that soon turned into a multi-billion worldwide business.
There were a number of reasons for this. The first, of course, was the abundance of qualified but cheaper workforce. By this time, Asian countries like China and India had produced IT workers who were able to provide the same quality of work that US and European workers could produce at half the cost. In addition, US companies found that IT outsourcing could save a lot of money on social security, Medicare, safety protection and taxes that they had to provide to domestic workers, but did not have to provide to their employees in Asia. They also found that it cost much less to train and educate foreign workers in their own country.
The situation remains still the same despite the fact that in the following decade both US and Europe went through a deep recession while many Asian countries moved forward by leaps and bounds. But this may be the preceding sentence should be rephrased as ‘because of the fact’ instead of ‘despite the fact’. The very misfortunes that the US and European economies have suffered could be the number one reason that companies in these countries had to resort to IT outsourcing. The focus may have shifted from one developing country to another, but the number of companies outsourcing their products and services is still growing. However, lately voices are being heard, especially in the US, against outsourcing to safeguard the jobs of domestic workers. To understand whether the voices of dissent are justified, let’s examine the pros and cons of outsourcing:
Pros of Outsourcing:
- Companies are able to provide products and services to customers at a cheaper price.
- The companies have a larger profit margin which makes the employees and shareholders richer.
- The cheaper prices allow customers to make more purchases which ultimately help boost the country’s economy.
- By outsourcing the non-core component of their business, domestic companies can focus on the core components and increase their productivity and profit margin.
Cons of Outsourcing:
- The biggest complaint against outsourcing is that the job that could have put food on the table of a domestic worker goes to a worker in a foreign country which may not even be supportive of the US in the international arena.
- The outflow of work and money (in wages, salaries, allowances and bonuses) hurts the country’s economy in the long run.
- When companies provide foreign companies/workers with passwords to their accounts, they may become victims of fraud.
- The political situation in foreign country may disrupt production and services causing huge losses to the outsourcing companies.
Outsourcing Pros and Cons: Outsourcing for Internet Marketing Tasks
Internet marketing is a great way to make money. It offers those who give it a go the opportunity to earn as much money as they want. Now, even though not everyone becomes wealthy with Internet marketing (though some people do), many individuals do quite well. Earning money online is dependent upon a number of factors, one of them being working smarter not harder. In this article, we will discuss outsourcing pros and cons, particularly as it concerns Internet marketing related tasks.
There are many reasons why people outsource Internet marketing duties and why those who do not should. Outsourcing helps free up valuable time, reduces stress, gives the marketer more reach and takes many of the mundane tasks necessary to succeed online, off of their hands. Below, we will discuss these reasons a little bit further. After which we will center our discussion on both the advantages and disadvantages of outsourcing. Our aim is to help individuals learn more about the positives and negatives of the aforementioned. Specifically, we will take a look at the outsourcing pros and cons of Internet marketing tasks.
Outsourcing helps you:
- Free up valuable time: One of the best things about outsourcing is that it helps to free up valuable time. When a person is forced to handle all Internet marketing tasks on his or her own, they often don’t have time to do much else. Far too often, Internet marketers focus so much on their work that they neglect their family members and friends. The purpose of working online and at home is to have more freedom, not less of it. It can become very easy to become a slave to ones work. Outsourcing is a very good remedy to this. It ensures that everything gets done but without requiring one person to handle it all. In our discussion of outsourcing pros and cons, this would be considered a pro.
- Reduce stress: Outsourcing can help improve mental health. Internet marketing, like any other occupation can become stressful. When a person has help, they are able to reduce their work-related stress. Instead of attempting to handle everything on their own, they are able to reduce their workload. Working too much is almost never a good idea. Workaholism is a real problem and one that can cause a great deal of stress, anxiety and worry.
- Give marketers more reach: Outsourcing gives Internet marketers more reach. They are able to get their message in front of a greater number of potential customers because they have other people actively helping them. A good outsourcer or team of them can easily multiply a person’s effectiveness and efforts, multiple times over. The more people a person has working for them, their ability to get their message in front of prospective customers, increases. Keep reading for more outsourcing pros and cons.
- Limit mundane tasks: To be perfectly honest, some Internet marketing related tasks are extremely boring. Most marketers and people in general, don’t like to perform boring tasks but they must in order to make money. Savvy marketers tend to pass off such duties to someone else. This someone else is almost always an outsourcer.
In summary, outsourcing pros include but are not limited to, limiting mundane tasks, giving marketers more reach and stress reduction. Next, we will take a look at some of the cons.
Outsourcing Internet marketing duties is a great for many reasons. We’ve already touched on some of the primary ones above. However, not everything is ideal about outsourcing. There are some drawbacks. It will be important that individuals consider both the advantages and disadvantages before deciding whether or not it is good for them and their business. There will some people who believe that it is and others who do not. Neither choice is necessarily wrong or right, though our position is that outsourcing can be very helpful and often needed. Obviously not everyone will agree and that’s perfectly fine. Well, without further ado, in our discussion of outsourcing pros and cons, below we will take a look at some of the cons.
Money: Money is the main problem with outsourcing. It costs money to hire help. Not everyone will have it. Those who do not will have to find another way to get those things done that have to be completed. The most obvious option would be to do everything yourself. That might be fine when just starting out. However, as an individual’s Internet marketing efforts become more fruitful, he or she may want to consider hiring someone.
Finding good help: Another problem associated with outsourcing is finding good help. It can be very difficult to find and keep.
Summary: Outsourcing Pros and Cons
In summary, the primary problem with outsourcing is money. It costs money to hire workers. Another issue is the difficulty of finding, good, qualified, hard-working employees.
If you are looking to ramp up your business, consider outsourcing. It is possible to find good workers at reasonable prices online: check out elance.com, scriptlance.com or freelancer.com for help.