Outsourcing is a great tool to improve business workflow. If you want to discover how to use it for your benefit, keep reading. We’ll tell you about this tool’s positive and negative sides and its influence on your business.
Why Outsourcing Is Good For Your Product: 6 Main Reasons
The best thing you can do with your business is to use outsourcing services to cut expenses. Indeed, if you spend less than you make, you profit more. Just calculate how much money and time you would spend hiring a team, training, providing a workspace for them, etc. With such expenses, It’ll be months before you can get a solid profit.
By 2023, the outsourcing market reached 212 billion U.S. dollars in expenditure. Being a profitable investment, outsourcing to nearshore or offshore agencies is especially good for small businesses as services cost much less than in the U.S. Besides, you can hire people from developing countries and profit from spending less on their wages.
Why Is Outsourcing Good for Big Businesses?
Here are 6 top reasons why outsourcing is good:
1. It cuts your spending
First, you can lower the price of your products and services to attract more clients and increase your business profit. Second, you don’t have to pay taxes.
2. It boosts business productivity
More experts, more accepted requests/sales, more satisfied clients.
3. You can use it in any market niche
Every business depends on people. More importantly, experts in their field.
4. It scales your business
If there’s a surge in your product’s or service’s demand, you can hire extra help using outsourcing resources. After the busy season ends, you can let the outsourcing team go or hire them on a permanent/contract basis.
5. You avoid all bureaucratic aspects
The agency will hire freelancers, so you won’t deal with any bureaucratic aspects of your cooperation.
6. You can hire as many experts as you need
You are not limited to any number of outsourced specialists. They can be more than your in-house team. Everything depends on your ability to manage them effectively.
Are There Negative Effects of Outsourcing?
Nothing is perfect in this world. Although outsourcing benefits, it has negative sides.
Here are some negative effects of outsourcing:
- You cannot affect the mood and moral state of the employees.
- Your cooperation won’t be as flexible as with the staff in your office.
- You may feel uncomfortable during the first few days.
These factors are not always true for all industries and don’t have that much impact on business. However, you should be prepared for them. To avoid any negative effects, it’s better to define them in advance and try to find solutions. Just hire one or several employees outside your office and see the result. You’ll likely save about 30% of your costs during the first three months.
Take the first step and define a monthly budget for your first outsourcing team. Just try using this method of cooperation to evaluate its best sides. It’s a good chance to make your business more profitable. You don’t lose anything. You don’t have to hire or fire anyone. Just provide the instructions and monitor results during the first month.
Outsourcing Can Distribute Jobs From Developed Countries to Developing Countries
Some outsourcing defenders admit that by outsourcing and offshoring different services to foreign countries, businesses facilitate the gap between the number of available jobs in the US that decreases and the number of people in search of work that only rises. At the same time, less-developed countries benefit from outsourcing more than their home country.
US citizens may argue that outsourcing can lead to higher wages and fewer jobs in their country. However, many analysts see outsourcing processes as a global advantage that will decrease the gap between more and less developed countries with time in the future.
Is Outsourcing a Chance for Developing Countries?
Many global corporations are among the leading providers of China’s high-end market. U.S. organizations often choose China to establish their manufacturing centers for several reasons:
- First, China’s labor costs are much lower than the U.S. or European rates.
- Second, it is easier to enter the market of the country where the manufacturing is operated.
- Third, having access to the Chinese market expands your chances to enter other Asian markets as well.
- Last, raw materials in China cost less, and supply and logistics chains are easier to operate, allowing for cutting operational costs even more.
However, being a favorable destination for manufacturing operations, China experiences problems because of the high demand and decreasing wages with an increasing population:
- For example, Apple doesn’t manufacture most of its products in the U.S. but in China. The company outsources its production to Foxconn, a Chinese corporation allowing Apple to decrease manufacturing and labor costs. In manufacturing its smartphones, tablets, and laptops, Apple utilizes a large amount of glass for displays cheaper in China.
- Organizations can cut costs and increase their profits and quality by outsourcing some tasks and services. Meanwhile, many employees in outsourcing companies complain about poor working conditions. Often, they receive low salaries and work more than eight hours a day.
- Many factories in China don’t offer adequate working conditions and don’t comply with US labor standards, especially among manufacturers. Regulatory methods regarding employees’ health safety differ from those of the U.S. because of labor laws. Thus, when outsourced employees in China work for a US company, they don’t necessarily have the same rights as American workers.
How Does Outsourcing Affect the US Economy?
The main advantage of outsourcing jobs to less developed countries is that companies can easily stay competitive in the global market and access foreign markets. Businesses can settle on lower labor costs by hiring workers from less developed countries and emerging markets with lower living standards. This also allows companies to ship produced goods from the manufacturing countries back to the U.S. at a relatively low price.
On the contrary, outsourcing jobs increase US unemployment rates, as currently, there are 14+ million outsourced jobs from the US that could be filled with unemployed citizens. If these jobs were returned to the US, 4.3 million workers who nowadays work part-time could get full-time jobs.
It’s worth noting that many foreign specialists are recruited to help with local marketing, translation services, and business development. These job positions could also be filled with US workers. Still, businesses see an advantage in hiring local specialists that know their native language and market specifics and can be paid lower rates. If US citizens took the same jobs, it would inevitably lead to higher prices for the company’s products and services.
4 Ways Outsourcing Damages Industry
As outsourcing to less developed countries proves to be cost-effective, more and more US companies tend to outsource their services. Each year, the number of outsourced jobs reaches 500,000. Although the capital is held by national and multinational organizations nowadays, it can damage the US industry in the long run. The shortage of job openings and the talent shortage in the US can give other nations a tech leg up on America and suppress the US economy. It is the fourth major threat of outsourcing to the US industry.
The Unintended Consequences of Outsourcing
Outsourcing and offshoring are natural results of the globalization of the markets worldwide, and the companies intend to cut operational costs and maximize revenues. If people in China or India can do the same job for a much lower price than US citizens, businesses will outsource such jobs without hesitation.
This business strategy proved beneficial, and companies are eager to allocate labor to its most cost-efficient use. As a result, consumers also benefit from lower costs of the goods provided by companies that outsource their services, and stakeholders receive increased profit margins. To sum up, without outsourcing, the US wouldn’t be able to maintain its global economic superpower status today as it is an integrated global marketplace.
Is Outsourcing Good or Bad for America?
Although outsourcing has pros and cons, many experts argue that the pitfalls are not drastic. Companies often have to cut costs to stay on the market, especially during the recession. By outsourcing manufacturing and business operations, such businesses can strive and succeed in the long run.
If outsourcing allows cutting costs, manufacturing products at lower wages, optimizing business resources, and offering value to the end customers, is it wrong to outsource some processes? It’s all about comparative advantage. Nowadays, the US can’t boast of a comparative manufacturing advantage because of high wages and strong currency. Outsourcing allows for settling on the most cost-effective solution.
Outsourcing Overseas and its Effect on the US Economy
Outsourcing is often blamed and politically manipulated to address the job shortage in the U.S. However, no one points out the number of jobs US businesses create due to outsourcing services. American companies that outsource some of their manufacturing and business processes benefit foreign countries and the economy of the United States.
Consequently, economies of less developed countries are boosted by American consumers’ demand for manufactured products. As a result, the US engages in international trade processes and receives the required goods at lower costs. This results in higher ROI and better-priced products for US citizens.
Outsourced goods and their components are then incorporated into the larger products in the U.S. and linked to the creation of job positions for high-skilled US citizens. However, these benefits are often disregarded when outsourcing is discussed. Undoubtedly, outsourcing is developing the economies of the US and foreign countries as products are manufactured overseas and then delivered to US customers at more affordable costs.
Myth Busters: Why You Should Not Be Afraid of Outsourcing Customer Support
Choosing between outsourcing benefits and risks, companies used to focus on risks and bury the idea without validation. We collected 4 core stereotypes accompanying outsourcing customer support service to prove you can solve each issue effortlessly.
1. Data protection issues
What’s the first thing that comes to mind regarding customer support outsourcing? – You will have to share your corporate information with a third party. Moreover, the main danger is sensitive data from your clients. Many businesses were damaged by breaching CCPA, GDPR, and other data protection acts. Nobody wants to be the next. Therefore companies avoid an outsourcing customer support approach.
What’s now? Now, all reputable outsourcing service providers work per data protection legislation. For example, WOW24-7 strictly complies with ISO, GDPR, and HIPAA requirements. It guarantees our customers that all the data of our agents are safe.
2. Challenging onboarding process
When the third party interrupts the processes, aligning things might be complicated. Business leaders should select agents with a solid background and then – explain the peculiarities of their offering.
Currently, we’re all used to the new normal and work from home, which was the first step toward proper management. Moreover, the assistance of an outsourcing customer service provider will allow you to involve and train more talents from different locations.
As the WOW24-7 practice shows, engaging outsourcing customer service provider cuts training time in half when saving onboarding efficiency.
3. High costs
We’re used to thinking that the step-by-step investment process is less costly than a service needing one payment. Let’s calculate. Imagine you need to involve recruiters to select agents, organize proper training for the in-house customer support team, and maintain all the processes & employee engagement. Each step requires effort and investment. Meanwhile, involving a third party, you entrust all team infrastructure and support, paying a reasonable price. The economy is visible.
4. Communicating with multinational clients
The problem of the language barrier is always relevant. Company representatives do not have extra time to train new agents in the work process. Our team allows feeling what customers trust not in words but in practice. Therefore, a comprehensive study of behavior, habits, thinking, and cultural components gets as close as possible to customer satisfaction.
The essence of good traffic in business processes is the ability to delegate confidently. Considering this approach, you keep your involvement to a minimum. Now, your primary goal is to move from theory to practice.
If you’re looking for an experienced outsourcing customer support provider – book a call with our team to discover how WOW24-7 can help you eliminate risks and implement success.