Part 3: Disadvantages, Answers with visuals
Introduction
Many studies have elucidated the centrality of outsourcing in the contemporary business platform. Companies assign their business processes to external firms instead of driving innovation agenda to strengthen the local workforce. Offshore outsourcing enables businesses to register significant profits margins and enhance their competitive advantage. Studies by Rajan & Srivastava (2007) revealed an increasing turnaround time for companies that outsource services from offshore firms. Despite the apparent benefits of outsourcing such as reduction of costs and time-saving, the practice can potentially reduce the morality of employees and make them less-connected with the company. This paper explores the disadvantages of outsourcing and proposes a solution to the problem of outsourcing.
Economic disadvantage
Although it is known generally that outsourcing saves costs and time, it is not true for all companies that outsource. Studies by Milberg and Winkler (2013) revealed a worrying trend about this organizational practice. 28% companies under study reported an increase in the cost of outsourcing. This figure is statistically significant and thus, negates the view that virtually all companies outsourcing services realize gains. The increase in costs is tied to the high costs involved while hiring foreign services and the fluid nature of currencies around the world. Most global currencies are dependent on the United States Dollar. Because of this dependence, the fluctuation of exchange rates affect the companies that rely on foreign services (Milberg & Winkler, 2013). On the same note, small companies may not outsource services because of the limited financial capacity to secure, hire and maintain services. The danger of this limitation is that these companies may not realize their true potential which may lead to reduced profit margins.
Social disadvantage
Outsourcing can significantly affect the culture of a company. For example, companies that outsource HR functions usually face the challenge of maintaining the social relationship between the employees of the company with the HR departments in the event of salary disputes (Milberg & Winkler, 2013). This problem may lead to issues of trust and affect the social fabric of the organization. Outsourcing various functions of staffing can have profound impact on the culture of a company and affect its vision. This proposition may affect the fundamental goals and vision of a company.
Proposed solution
The mitigate the problem of outsourcing, there is a need for companies to initiative innovations that can spur economic take-off and build the technical, professional and intellectual capacity of the local resource. Companies in the United States can take advantage of the country’s highly-trained personnel and develop their capacity to handle the various business processes (Rajan & Srivastava, 2007). Utilisation of local personnel will increase employment opportunities and expand the capacity of companies to handle a wide range of business opportunities and challenges. This resolution has the advantage that the local human resource would be effectively utilized to spur economic growth of a country. However, the disadvantage of this solution is that it is not suitable where the development of the local resource proves more costly than outsourcing.
Conclusion
This paper sought to explore the disadvantages of outsourcing services from offshore countries. The study reveals outsourcing has led to a reduction in profit for 28% of companies. Outsourcing not only creates a disconnection between the employees of a company with the company’s values, it also affects the culture of a company. The paper recommends that companies should develop the local resource and build sufficient capacities to meet the challenges of the modern century. This would reduce unemployment problems and effectively engage the local resource.
References
Milberg, W., & Winkler, D. (2013). Outsourcing economics: global value chains in capitalist
development. Cambridge University Press.
Rajan, R., & Srivastava, S. (2007). Global outsourcing of services: Issues and
implications. Harvard Asia Pacific Review, 9(1), 39-40.
