Greed or Need: Outsourcing and Its Benefactors

Sunday, April 7, 2013

Given how wide-encompassing the BPO world is, it only stands to reason that most would resist its development. One of the popular arguments presented by people against outsourcing is that the practice is only done by greedy companies looking to maximize profits.

Exhibit 1: The Government

Did you know that numerous government agencies are actually outsourcing some of their services? According to David Seader Associates President David L. Seader, the government agencies are engaging in public-private partnerships because these collaborations help the agencies to be cost-effective, increase innovation and provide speedy implementation.

outsourcing benefits
Strategic advisory firm Tholons echoes this sentiment on this document, released on March 2010. The firm listed similarities and differences between the public and private sectors, and explained most of the reasons government agencies outsource their services and other business processes. On the document, Tholons even gave samples of government contracts which included the State of Indiana which tapped IBM and ACS; State of Georgia, which enlisted the services of IBM; and City Government of Santa Clara, which contracted Unisys. Most of these contracts ranged from $39.7 million to as much as $2.0 billion.

The bottom line is that these government agencies tap third-party outsourcing firms in order to save millions of dollars. This in turn results to positive changes in the US economy and helps prevent excessive federal spending. Less spending means there's a lesser need to increase taxes.

Exhibit 2: American consumers

Cato Institute Senior Fellow Michael Tanner points out that “economic policy is not about preserving every single job that current exists at any cost. Rather, it should be about creating general prosperity.” True enough, BPOs have introduced general prosperity. Since the companies that enlist the services of BPO firms are able to produce their goods at a lower cost, these products are often distributed to the market at a lower price. Lower prices equate to more savings. The US Bureau of Economic Analysis can attest that the Personal Saving Rate rose to 4.7% in 2012 from 3.6% in 2011. This goes to show that yes, the American consumers are indeed saving more.

Exhibit 3: Firms that are about to go under
advantages of outsourcing

Outsourcing has saved countless companies from going under. For example, let's say that Ford has been
going through tumultuous times during the recession. A couple of its manufacturing plants were already shut down. Then the company decided to outsource a part of their manufacturing line in China. With little turnabout time, the American truck was available in China.

In this case, outsourcing saved the company as it introduced more revenue without increasing operational costs. Outsourcing helped Ford overcome financial difficulties by introducing shorter shipping distance to consumer, overcoming several foreign trade barriers and establishing an on-the-ground presence in China. When Ford sufficiently recovered, it opened several skilled positions in America, and both the employees and the company benefited.

The Rundown: Outsourcing is not done by greedy companies looking to maximize profits. Rather, the business practice helped countless companies recover from losses, build stronger market presence, cut expenses and provide more jobs for the people. By outsourcing some business processes and services, these companies are able to boost the American economy and help the country recover from its economic slump.