by: Richard A. Hall
If you were to look at many large corporations such as Sprint, Dell, and so on, you would find a number of jobs are outsourced overseas. Outsourcing is nothing new but the trend of global outsourcing has ignited a firestorm of controversy.
North American businesses are increasingly outsourcing business functions to companies outside of the United States. Often this outsourcing is seamless to the outside world. The company maintains control over the processes and results, while certain business functions are quietly conducted in another country. Companies often benefit from reduced operating costs and an eager workforce. For the employees, particularly those in struggling economies, they are afforded higher wages and an increased standard of living.
While this may seem to be a win-win proposition for all, it does not come without its share of naysayers who believe that this practice is further eroding the already shaky North American economy. To understand this controversy, we must look at why companies decide to outsource as well as the type of jobs being outsourced. Companies cite a variety of reasons for outsourcing from lack of qualified, available labor to cost concerns. Unfortunately, while many people in the United States want to work and some actively seek positions, sometimes these individuals are not qualified or unreliable. To the company, this creates a risk of missed deadlines, understaffing and its inherent consequences, under production, and so on.
Cost and competition raise another issue. Businesses around the country are vying for ways to reduce cost while increasing effectiveness and productivity. By using overseas outsourcing, companies are able to save on one of the largest line item expenses in business – human capital. Consider alone the skyrocketing cost of healthcare in the United States. Businesses can spend an additional $8000 – 10,000 per employee, per year on benefits alone. When added to salaries, workers compensation, and operational expenses it is easy to see why global outsourcing becomes an option.
Global outsourcing can also offer competitive advantages. Companies can take advantage of specialized knowledge and emerging technologies by outsourcing certain processes to other countries. In this way a company can hire those leading an industry and leverage that competitive advantage in the marketplace.
The underlying discontent with global outsourcing has to do with wages. In example, outsourcing to countries such as India and Mexico enables companies to pay much lower wages than they would pay North American workers. With an abundance of people in foreign countries interested in making higher North American wages, finding help is never a problem. For instance, a telecommunications company pays a customer service representative in the United States between $20,000 and $30,000 per year on average. If the company were to turn the same job over to someone in another country, they would likely pay between $10,000 and $15,000. For the foreign worker this salary enables them to significantly raise their standard of living while the same salary would be at the poverty level for North Americans. For the company and the overseas worker it is a win-win situation. However, this also means workers in the United States are being forced out of or passed over for jobs – thus the controversy.
American Express was one of the first companies to publicly come under fire for global outsourcing. Dell too has come under attack for basing customer service in India. United States customers complain about the language barrier and lack of service but neither company has suffered the loss of profits as a result of outsourcing.
From the viewpoint of the overseas’ employee, they simply want to make a decent living. With jobs difficult to find in their own country, accepting an outsourced job is a gift from Heaven. These people often make 100% or more of what they could make in their own country, which makes outsourcing highly profitable and very attractive. Obviously, with so much at stake, the outsourced workers are willing to be trained, to follow rules to the tee, to respect authority, and be to work on time, every time.
As you can see, outsourcing overseas is a huge dilemma, with growing concern. When you consider the growing positions being outsourced, the concern rises. Although you might generally think of customer support as being the number one outsourced job, you might be surprised. Below is a list of other jobs that are often outsourced:
• Customer Service – Although this was not one of the original aspects of a business outsourced, we now see a huge number of companies, small to large, using overseas services in all areas of customer support.
• Data Analysis – The amount of data being generated by companies throughout the United States is staggering. In most cases, conducting market analysis and reviewing trends is crucial to a number of industries. For instance, much of the data coming out of the New York Stock Exchange is sent to India where it goes through a complete analysis process.
• Research – Research is also another large area where overseas outsourcing is used. In this case, companies will outsource large or portions of large research projects to people in other countries, which covers everything imaginable such as pharmaceutical trials to genetics to nano stocks.
• Engineering Design – More and more, we see engineering design being outsourced. Typically, companies in the United States establish what is known as an Offshore Development Center or ODC, which includes a number of design fields such as architectural, mechanical, hardware, structural, and product.
• Medicare – Many people are unaware that Medicare is also outsourced to foreign countries. Services provided by employees could include data entry of doctor’s transcripts to interpretation of an MRI, CAT scan, or other medical imaging processes.
• Art and Animation – With different countries offering unique levels and genres of creativity, a company needing a website, illustrations, artwork, book cover design, television show, graphic art, and other similar functions would turn to other countries for fresh ideas
• Legal – Finally, we also see legal support services being outsourced overseas. Although professional services would not be included, we do see some of the more low-level tasks such as data entry of legal documents or transcripts and patent searches being performed.
Although outsourcing to other countries has been done since the early part of the 1990s, it has become a multi-billion dollar business for other countries. Although many of the workers are low skilled, they are again, eager and willing to work. The trend of outsourcing will likely to continue to expand. We often view the negative impact to North American workers but the reality is we too benefit from outsourcing.
Many small businesses provide services to other countries. Writers, web developers, marketing consultants and many others build a business that is largely global. These small businesses are often started by laid off or out placed corporate employees. Other countries outsource to the United States for the same reasons we do – specialized knowledge, lower costs, and qualified labor. Let’s face it the world has changed. The debate over outsourcing is unlikely to subside any time soon, but the rules will continue to be written.
About The Author
Richard A. Hall is founder and President/CEO of LexTech, Inc., a legal information consulting company. Mr. Hall has a unique breadth of experience which has enabled him to meld technology and sophisticated statistical analysis to produce a technology driven analytical model of the practice of law. As a busy civil trial attorney, he was responsible for the design and implementation of a LAN based litigation database and fully automated document production system for a mid-sized civil defense firm. He developed a task based billing model built on extensive statistical analysis of hundreds of litigated civil matters. In 1994, Mr. Hall invented linguistic modeling software which automatically reads, applies budget codes, budget codes and analyzes legal bill content. He also served as California Director and lecturer for a nationwide bar review. Mr. Hall continues to practice law and perform pro bono services for several Northern California judicial districts.