What is outsourcing?
The practice of employing a third party from outside a business to carry out tasks or produce commodities that were previously completed in-house by the business’s own employees and personnel is known as outsourcing. Companies typically engage in outsourcing as a cost-cutting strategy. As a result, it may have an impact on a variety of occupations, including customer service, manufacturing, and back office work.
Why is outsourcing important?
Businesses can significantly lower labor costs through outsourcing. When a business uses outsourcing, it enlists the assistance of external, non-company companies to carry out certain activities. In order to accomplish the work for less money, outside businesses frequently establish different remuneration schemes with their employees than the outsourcing company. This finally makes it possible for the business that chooses to outsource to reduce its labor expenditures.
Companies can use outsourcing as a cost-saving technique as well as to better concentrate on their core competencies. Because another organization can complete these minor jobs more effectively than the company itself, outsourcing non-core operations can increase productivity and efficiency. Also, this approach might boost industry competition, shorten turnaround times, and reduce overall operational costs.
Globalization and Outsourcing
Globalization is the process of integrating political, economic, and cultural systems on a global scale, which connects and interconnects markets and industries around the world. The integration of the world economy is the outcome of various reasons. The fundamental driver of the recent two decades’ dramatic acceleration of globalization, however, has been technical progress. Technology innovation makes it easier to travel, communicate, and conduct business internationally. The increase in globalization is due to improvements in the internet and telecommunications infrastructure.
Many political, economic, and social implications of globalization exist. There are both good and bad impacts. For instance, globalization boosts productivity and economic growth. It leads to democratic freedom in politics. Moreover, it leads to environmental destruction, the exploitation of the least developed and emerging nations, and the suppression of human rights. The advancement of transportation and communication technologies, along with a free market economy, have promoted the free flow of capital, products, and services.
Throughout the past two decades, global outsourcing and globalization have increased and grown at an increasing rate. The two have grown off of one another. The level of organizational activity and function outsourcing has increased as a result of globalization. On the other hand, outsourcing has accelerated globalization and the fusion of several national economies, creating a single global economy.
The growth of information technology has largely been attributed to outsourcing. This is due to the fact that major information technology businesses contract out their research and development activities to various developing nations with creative brains. These innovative minds would never have had the chance to take part in the innovation and development process if it weren’t for outsourcing. Thus, outsourcing has aided in hastening the pace of globalization by giving a platform for the advancement and expansion of information technology.
The increase of multinational corporations operating all over the world has contributed to globalization. Transnational organizations enable the transfer of capital, knowledge, and labor from one region to another. They support the technology transfer from advanced economies to developing and less developed ones. As a result of globalization, they assist in integrating developing and underdeveloped economies into the global economy. Multinational companies have grown as a result of outsourcing. By lowering operational expenses, outsourcing enables businesses to maximize profits, which are subsequently invested in foreign subsidiaries and affiliates. Through outsourcing, it is made sure that management and entity resources are solely applied to important problems facing the business. The management of strategic business units aids in the growth of the companies brought about by globalization.
Credit: KMC, Outsourced accelerator, traqq
