Outsourcing, a business practice in which companies delegate tasks to people outside the
organization, is on the rise. Estimates suggest that one in six jobs in the United States – or
almost 20 million positions – are subcontracted. 1 This blog post explores the advantages
that outsourcing offers and describes the biggest challenges of this approach.
The benefits of outsourcing
Why do companies outsource? Outsourcing helps businesses get the most out of their
employees, as delegating tasks to an outside agency enables employees to focus on what
they excel at, while external workers complete the tasks that employees aren’t equipped
to handle. Outsourcing is especially useful when a company needs a one-time service,
such as launching a marketing campaign; in these situations, it does not make sense to
hire a new employee just to complete the task. Most importantly, outsourcing a service is
cheaper than paying employees to perform that function: the salary of in-house
employees is higher, they require benefits such as insurance and paid vacations, and
necessitate expenses such as education, computers, and other office supplies. 2
The social costs of outsourcing
While outsourcing can be a boon to businesses looking to save money and increase
efficiency, the practice has dramatically damaged middle class workers. For instance, in
America, many occupations are outsourced not only to cheap-labor countries like China
but also to third party contractors in the US. This trend of outsourcing has led to
numerous layoffs of workers and has generally driven down the cost of labor. Thus, the
growth of outsourcing is a major contributor to the decline of the American middle class,
which has recently fallen from 61% of the population in the 1970’s to below 50%. 3
The risks of outsourcing
Outsourcing can benefit companies in a variety of ways, but there is also a significant
amount of risk involved with delegating tasks to third-party contractors. Agents of a third
party are often given access to company data and may not be trustworthy; they are liable
to mismanage or even steal this sensitive information. In fact, according to the 2013
Trustwave Global Security Report, third-party IT staffs were responsible for 63% of data
breaches. 4 In order to avoid data breaches caused – directly or indirectly – by outsourcing
companies, businesses must choose third-party partners carefully. Moreover, it is crucial
for outsourcing companies to monitor their employees’ computer activity to ensure that
they are not intentionally pilfering data or unintentionally making it vulnerable for
exploitation by hackers.
- http://www.latimes.com/business/la-fi- outsourcing-middle- class-jobs- 20160630-snap-story.html
- http://www.business.com/management/7-signs- that-its- time-to- try-outsourcing/
- http://www.latimes.com/business/la-fi- outsourcing-middle- class-jobs- 20160630-snap-story.html
- http://www.computerweekly.com/news/2240178104/Bad-outsourcing- decisions-cause-63-of- data-breaches
