Outsourcing: What Is It?

It is interesting to make a note of how ‘outsourcing’ as a concept has received varied responses. The way different people accept such an introduction to the mainstream economy is being hotly contested. While some consider it a great way to take the economy forward, others see massive loop holes in the entire system. Let m take you through what the concept means and all that it implies.

So what exactly IS outsourcing?

Outsourcing is nothing but getting contracts for a particular task, and then giving them to residents of another country to complete those tasks. Say, for example, that I get a contract. I can get it performed by people living in other countries who I will have to pay for completing those tasks.

Advantages

Before getting into that let me make it clear that outsourcing work may not be a good idea for all. Outsourcing cannot work well for everyone who is interested in maximizing profits. Therefore you must assess the nature of the job and find out whether outsourcing work will be cheaper for you, or employing people of your own country would be a better option.

This decision will depend upon the companies that you are working with. Let us asses the situation with the example of companies in the United States and India.

For Companies:

It is a well known fact that companies in the US expend the maximum in terms of taxes and wages. They have the highest rates of these two al over the world. Therefore, to get a task completed in the United States by employees who are residents of the US itself would mean to pay them wages in the terms the country’s economy prescribes. That is, pay them the highest wages. So the simplest thing that you do is, employ residents of another country who would not demand such high wages.

At this end of the spectrum could be a country like India, where, since the taxes to be paid are less, the wages are low too. Therefore, in outsourcing work, the companies in the US can save a lot of money in wages and get their product manufactured or services performed at low costs. This also would help them sell their goods or services at competitive rates.

For Consumers:

Above I have merely tried to illustrate the rationale behind outsourcing. Apart from saving huge expenses for the companies, outsourcing, like mentioned above, enables those companies to sell their goods at reduced prices, benefiting consumers.

For Employment:

Another way of looking at it would be that your company pay be providing jobs to hundreds of people in the country you outsource your work to who would ordinarily have been jobless.