Introduction to Outsourcing

Written by Clayton Reeves for Gaebler Ventures

This article briefly explains the costs and benefits of outsourcing work to other countries. While the outsourcing has a negative connotation, there are benefits to be reaped for companies large and small when dealing with outsourcing.

A lot has been made of outsourcing and the negative effects it has on jobs and towns.

Introduction to Outsourcing

Many groups and factions would have you believe that giving work to other nations is its own form of treason.

However, there are positive benefits to outsourcing that the economy can feel as a whole. I'll explain several examples and the effects they have on our marketplace. As a small business owner, you will need to take advantage of an evolving global world. The global market place can offer many opportunities for cheap labor and services that can lower your bottom line. Here are a few examples.

Outsourcing is the act of sending work to an external source to have it performed in a more swift and efficient manner. Offshoring is different in that it involves actually moving physical labor to another site, usually in another country. Outsourcing can be anything from moving a call center to India, to moving an IT project to Iowa. There are examples all over the US.

One example is a McDonald's in Cape Girardeau, Missouri. This McDonald's has had trouble with their automated drive thru line, and decided to outsource the teller position to Colorado.

Basically, an operator takes the order in Missouri and then sends it to the screen for the customer to view. This has reduced the error percentage to only 1-2%, from over 3%. While this may seem like a small operation, imagine the economies of scale that could be taken advantage of if all McDonald's were wired in a similar fashion. The efficiencies would be incredible, and service would increase as well.

Extend this example to all fast food restaurants and you can get an idea of what sort of innovation this really could be. Thinking outside the box is something that you will need to do as a small business owner. These sorts of innovations can give you the upper hand over competitors.

Another example that everyone has heard of is call center outsourcing to India. These centers have gotten a bad reputation for seemingly ignorant operators, long wait times and unintelligible accents.

However, as an ever resourceful people, the workers of India have constantly worked to improve their services and now have extensive accent education services. This means an Indian operator can now impersonate an American, British, and Australian accent without their customers knowing. Gone are the days of hard to understand operators in New Delhi; now it is difficult to tell whether they are in Utah or Bangalore.

This is just one way that outsourcing is making the lives of many companies easier. IBM and Microsoft all have large groups of telephone operators in India.

This helps businesses in many ways. Outsourcing allows the employees at IBM and Microsoft to focus on things other than answering phones. Although technically jobs are lost to India, they are low level jobs and American employees are able to perform tasks that can feed their ambitions. India workers, on the other hand, are anxious to learn about American work strategies and their applications to business. It is a win-win situation for the parties involved.

When he's not playing racquetball or studying for a class, Clayton Reeves enjoys writing articles about entrepreneurship. He is currently an MBA student at the University of Missouri with a concentration in Economics and Finance.

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