Outsourcing Facts You Need To Know
Outsourcing today is a multi-billion dollar industry. But what exactly is outsourcing? Here will discuss a few outsourcing facts you may find interesting.
Outsourcing can be described as the delegation, leasing or sub-contracting of work to an external company or provider. The main reason for outsourcing is to allow the company seeking outsourcing services to focus on its core business and operations. Typical services outsourced include IT services, data entry, bookkeeping, accounting, business consulting, legal services, web design and development, human resource services such as recruiting, transcription services and call center services.
Some outsourcing facts have the Philippines as the most popular offshore outsourcing country mainly due to the fact that it has a large number of English speaking people. Another reason the Philippines is popular is the labor costs are much lower there. Other popular outsourcing destinations include China, Malaysia, Indonesia, India, Thailand, Vietnam, New Zealand and Australia.
One of the major reasons for outsourcing is cost reduction. Some overblown outsourcing facts have the cost reduction figures to about 50%. More realistic outsourcing facts would have this figure at around 30% depending on the business function outsourced and the outsourcing destination. The cost savings are experienced not only from lower labor costs (if outsourcing is done offshore in Countries like India and China) but from economies of scale (which results from specialization).
Another benefit from outsourcing is better service quality due to the fact that the supplier is a specialist in the outsourced business function because of its focus on the particular function. A business is also said to benefit by improved credibility if its outsource provider is a well known and superior provider. From an accounting perspective, some outsourcing facts say that changing fixed costs into variable costs makes the business’ operational leverage better. Outsourcing will also make the variable costs easier to predict.
Outsourcing facts and figures have job loss numbers in the United States to be at over 250,000 due to the over 500,000 jobs outsourced since 2000. The U.S. Department of Labor says that outsourcing is set to increase in terms of scope and numbers and they have the figure of outsourced jobs standing at over 3 million by the year 2015. These outsourcing facts may seem very grim and scary particularly in the backdrop of the economic recession and the resultant job losses. It is easy to see why Americans would be concerned by the trend in outsourcing. However, the fact of the matter is, outsourcing is good for any economy.
Statistics have the American economy growing despite its increase in outsourcing. Output from manufacturing companies in the U.S. has also increased. This means that more jobs are being created. An important fact to note is that only the large companies are the ones that outsource offshore and these companies do not really create jobs. Smaller companies, which do not outsource because of their size, are the ones involved in creating job opportunities. Another reason for Americans not to panic from the outsourcing facts is because a large number of their population, the baby boomers, will soon be retiring opening up many more jobs than those lost to outsourcing offshore.