Economic Impact of Outsourcing
The concept of outsourcing has erupted in popularity in the 21st century. Many corporations and small businesses reap the advantages of outsourcing their manufacturing or production needs to maintain their competitive edge. As employment in many countries contracts, there are people who look at the benefits of outsourcing as damaging to an economy.
The main argument is reducing the labor costs involved in producing goods or services. On the surface, American employees view outsourcing as a threat to their own jobs.
However, this argument is easily overshadowed by the many benefits of outsourcing in today’s economy. . Increased Manufacturing To be competitive, many tend to utilize their workforce to the maximum levels.This stream of constant manufacturing leaves little area for expansion and injects fatigue over the workforce. In an effort to increase manufacturing, a company can outsource portions of the needed work or tasks to a smaller more focused group of individuals who can provide an accurate and easier outcome. By outsourcing, companies can achieve improved levels of efficiency. Even an extremely conservative estimate places the savings by outsourcing at a healthy 9 percent.
5] Lower production costs lead to a decreased price for the consumer in a competitive market. This frees up more of the consumer’s income to purchase other goods and services. An increase in demand, in turn spurrs the need for the delivery of goods and services, thereby stimulating the economy.Continued Innovation Many businesses focus too much on the task at hand rather than updating their information or procedures. Technology constantly expands and is perfected in other areas of the world. Companies can become more innovative and learn new techniques for improving their tasks and output from new specialists acquired by outsourcing. .
Lower Consumer Cost Consumers will benefit from this method of manufacturing and production. Typically, when a company can lower it’s cost to produce goods or services the cost savings are passed directly to the consumer. This provides an increase in sales for the company and a lower cost for consumers in and out of an economic downturn. With lower prices, consumers are able to purchase more goods which creates additional demand in the economy. Thus, jobs elsewhere will be created. 8. Employment Boost Another major benefit that outsourcing has for economies is the boost in employment.
This is usually evident in any country with large multinational corporations. The infrastructure will need to be built, which means more work for the local construction industry. Once the building for outsource operations is complete, not only will it need to be staffed with workers specifically for what the company wants, but it will also need support teams. These teams take care of back office functions, building maintenance, and security. All of these positions will need to be filled, and the increased percentage of the population with employment means a boost in the local economy. . 1 Increase in Trained Personnel IT outsourcing and indeed outsourcing in general also lead to a possible increase in trained personnel in the country.
As the demand for certain skills rises due to outsource jobs requiring them, the number of people studying to acquire those skills can also see an increase. Some of these skills can be self-taught, but others cannot be. This opens up possibilities both for academic institutions and businesses to offer courses for training people. Depending on the demand for these skills, these can potentially get hundreds of students enrolling.The increase in the talent pool then serves to encourage more investment from companies that require such skills. In terms of economics, outsourcing advantages manifest for both the company that needs it and the country that provides it. The decision to outsource may lead to a number of political conflicts, but the economic benefits are beyond argument.
The company saves money and can focus on its core competencies, while the outsourcing provider experiences a boost in its economy and foreign investment. It is a win-win investment for both parties. In conclusion, outsourcing is a fantastic way for any business to compete in the global future.