Smart Business Decision or Dirty Word?
October 2004
Outsourcing. It has quickly gone from revolutionary business concept to 4-letter word. As you may have noticed during election time, political speechwriters had fun injecting it as a negative catchall. A real synonym for 'screw-up'. Yep, a business practice aimed at budgetary efficiency has become a buzzword of fear.
As in most cases, fear is fueled by lack of understanding. The fact of the matter is outsourcing means different things to different people. Here at OffSite Works, business prospects may comment, "Oh, we keep everything internal - we don't outsource", only to discover they have vendors for HR, printing, database support, etc. So, is this outsourcing? Well, it’s not offshore. Further description is definitely warranted with outsourcing and all kinds of interesting sub-categories have been popping up.
OffShoring describes the typical relationship assumed with outsourcing. Huge rollouts of a company's operational or IT processes to a foreign company, often leaving pink slips in its wake. Companies going offshore are typically looking for lower wage costs; India is currently the offshoring leader.
NearShoring is taking processes a few hundred miles instead of a few thousand. The geographic approach of a German CFO believing better control will come from using a Polish support firm rather than one based in Korea.
OnShoring/ InSourcing describes our U.S. based alternative to offshoring. Data security and copyright laws may be issues if certain company functions are sent abroad, but can be avoided by using an off-site U.S. based provider. Companies also are influenced by quality, consistency and better service from an onshore firm.
Employee Lift-Out is the term used when a company transfers its staff, usually an entire department, to its outsource provider. The employee typically does the same job, but sees a different company name on their paycheck.
Global Sourcing involves U.S. companies opening operations in another country to handle IT or other functions, bypassing the middleman of offshore support companies and, at times, avoiding layoffs here by starting new programs there.
Our country has developed a love/hate relationship with the term. Do we value outsourcing as a tool to strengthen our businesses and thus our economy? Or do we dread the practice, interpreting it as a job-loss machine?
Fortunately or unfortunately, all aspects of outsourcing are growing rapidly in the global market. And whether your company uses freelancers, small U.S.-based rollouts (payroll processing, market research) or invests in full-scale offshoring (tech support, call centers), you have to take the emotions out and get objective about it.
We must educate ourselves when it comes to any business trend about both the
merits and negative by-products. Research, research, research. Only then can
we objectively evaluate what the best strategy is as both employees and
employers.
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