Outsourcing: Multinational Firm Perspective
Outsourcing is indeed a huge phenomenon that hooked all companies, from small to huge corporations, at the edge of their seats. It cannot be denied that outsourcing is definitely one of the biggest trade activity today that has enabled thousands and millions of workers from all over the world to participate in a global trade. What is outsourcing? It is a process of subcontracting a certain work load of the company to a third-party. It means that the process of outsourcing entails hiring people from outside the company or outside the country to do the job for a cheaper cost but of high quality (Linder, 2004). With the increasing inclination to outsourcing, it is but right to look at the various advantages and disadvantages of outsourcing.
Advantages of Outsourcing
One of the most defined advantages of outsourcing is the cheaper cost. What does it mean? It cannot be denied that for huge companies and multinational firms, the employees demand higher wages. For example, in the company of Telus Communications alone, the customer service representative should be paid at least $8/hour at the minimum in Canada. If the computation is made Telus will have to pay one employee at total of $40 per day and a total of $200 per week. Whereas, if the company will outsourced the customer service job to a third-party that knows the English language and with proper training, the $40 per person could be used to pay 2 or more employees already. In this way, multinational firms are able to spend huge amount of money per year and simply use such money to expand their business and to invest in other market field. In this regard, it cannot be denied that cheaper cost of labor is the most attractive concept that many companies are embracing in order to ensure profitability and continuous growth.
Another advantage of outsourcing is the access to operational expertise. It cannot be denied that there are times wherein a company is looking for people who have the special skills and talents that match up the requirements of the company. For example, Hewlett-Packard is one of the leading companies in the field of information technology, computer and other gadgets. However, if the employees are just based in one location only such as the United States of America only there might be a problem in terms of filling up all the required positions. Such as in the case of hiring technical support for the computers and gadgets that are distributed by Hewlett-Packard. If there is no sufficient number of qualified applicants that applies for the position, the operation of the company might be in jeopardy because there is no sufficient work force to do the job. In this scenario, there is a need to outsource operational experts to do the job. Hence, when people phone in Hewlett-Packard technical support services to inquire about a product or to ask for a technical assistance, customers might be surprised to notice a different accent on the technical support representative and find out that they are talking from someone in India, China or the Philippines.
With outsourcing, companies are able to select to a diversified and wide selections of third-party offering operational expertise, talents, skills and work ethics that will definitely contribute to the success of the companies. Just like an old cliché goes “there are lots of fishes in the ocean”. This only means that even if the third-party is in the Philippines, India or China, it does not mean that they lag behind the Americans and other citizens. You can always find a gem among these third-party outsourced service providers. Apparently, in terms of work ethics, these third-party providers are often more dedicated, hard working and dependable. Of course, every third-party service provider is different from the other, it is up for the companies to select and make the best out of it.
Disadvantages of Outsourcing
This is not to say, however, that outsourcing is the best there is. There are also some advantages such as quality risk. It has to be remembered that when outsourcing is being made, the communication might be at stake. Time zone differences is a great factor too. Hence, the quality of products and services that are being made can be put into jeopardy. Real time management operation and communication can sometimes be hard to achieve. If the company is able to outsource their operations to poor and sub-par quality service provider, customer service satisfaction will reduce overtime. Just imagine a multinational corporation's failure to employ good English speaker, the tendency of mis-communication will become a big problem too. Another disadvantage that can be found in outsourcing services is the lax of quality services. Every contract has quality of service provisions but there are instances that this provision is being overlooked. Hence, services rendered are not even satisfactory (Domberger, 1998).
Moreover, another worse disadvantage of outsourcing is the gradual reduction of employment opportunities for Americans and citizens of their own country. Since everything is being outsourced for a cheaper cost such as in the call center industry, many native English speaking workers are losing their jobs which is not a good sign too for the economy.
With all the foregoing, it cannot be denied that outsourcing is a great way to get cheaper operation expenditures. But then again, companies must be aware that there is a need to really be selective of the third-party service provider because the quality of services are at stakes. Although there are different disadvantages that can be attained, it is still being overlooked by many companies because the outsourcing processes are being improved nowadays. Efforts to improve time zone differences and communication problems are being made continuously.