Disadvantages of Outsourcing

Scholasticus K May 10, 2019
Tap to Read ➤
During the economic recession, outsourcing was criticized by economics and business exerts. Today outsourcing demerits are viewed with seriousness.
In the latter half of the decade spanning 2001 to 2010, the United States economy and many other economies in the western hemisphere, suffered some recessionary losses. There were many causes, distortions, and strategies which have come under the heat wave of harsh criticism.
In the United States, the Capitalist regime that had stood the long test of time, was significantly shaken due to the economic cycle, and had to lean on the support of the government to prevent from falling.

About Outsourcing

Like any business coin, there are certain outsourcing pros and cons; however, in recent years, the cons or demerits have come under the scanner. In a broad sense, the concept of outsourcing can be defined as 'passing or contracting a task or service to a third-party to reduce the workload'.
Outsourcing can be also done within the nation, where work can be outsourced to another United States-based firm. However, the term outsourcing, today, refers to giving out work to foreign companies, which are based in nations where labor cost is low.
Some of the biggest outsourcing locations include India, China, and Brazil. There are considerable effects, positive and negative, on the economy, when the work is outsourced by companies. Here, we shall discus outsourcing and its effect on the economy, business strategy, and human resource management.

Economic Disadvantages of Outsourcing

Offshore and overseas outsourcing is suitable for only a particular economic situation. Outsourcing should be taken up by an economy that has a rather less population, but a very good currency exchange rate.
The economic growth of the economy must be excellent, and the GDP and national income must be sufficient to pay off the outsourcing, without affecting the rate of employment. However, in nations such as United States, outsourcing affected the rate of employment, as it was left unchecked.
Initially, unskilled labor in underdeveloped countries proved to be a good host to outsourcing, but when the cheaper outsourcing of IT jobs and financial jobs started gaining momentum, it was tagged as export of jobs.
According to reliable outsourcing statistics, 500,000 jobs were outsourced since the year 2000. There are two negative effects of this phenomenon, namely, there is job reduction in the exporters nation job cuts, and secondly, the exporter loses foreign exchange.

Business Strategy Disadvantages

An eminent outsourcing risk is that the quality of the output tends to be compromised as a result of unawareness of the American culture among the working people. This often results into the development of cultural barriers and a certain grudge among the people doing the work and their customers.
Though this drawback is inevitable, it often results into unwanted situations and loss of goodwill. The drain of job opportunities as well as foreign exchange leads to intensification of the grudge and frustration.
There are no specified internationally set up bodies, that govern the phenomenon of outsourcing, and hence, standardization of procedures, processes, and work conventions has also been viewed as a dilemma.
IT outsourcing disadvantages are often narrated by experts in the filed and dependency on each other. This often puts the jobs of employees of both the companies (outsourcer and outsoursee) in a risky position, during fluctuating economic conditions.

Human Resource Aspect

Outsourcing disadvantages are quite generic in nature; the first one being the odd working hours and the low challenge in work.
People executing the outsourcing are often located in the eastern hemisphere and have to cater to their clients who are located in the western hemisphere. The time difference forces them to work throughout the night, which has an effect on their health as well as their constitution.
The second aspect is that the work is often of clerical nature, leading to many arguments by philosophers claiming that outsourcing kills off the ability of an entire generation to think properly.
Thus, from both ends, the reasons to outsource have been challenged due to the several demerits of outsourcing that have suddenly come to light.
Write for us