Outsourcing

Tina Richardson

Kaplan University

CM225-07: College Composition II for Business Majors

Rebecca Briley

April 05, 2010

Outsourcing does not necessarily mean "out of the country" Jobs remain

Outsourcing does not necessarily mean "out of the country." One of the silver linings of outsourcing remains so elusive is that despite the growing status it remains under researched and poorly understood. Outsourcing is the practice of using outside firms to handle work normally performed with the company. The issue has become highly emotional because of outsourcing's two dramatically different effects: it leads to layoffs and dislocations for thousands of U.S. workers, even as most economists say it will ultimately strengthen the U.S. economy. Small companies routinely outsource their payroll processing, accounting, distribution, and many other important functions often because they have no choice many large companies turn to outsourcing to cut costs. In response, entire industries have evolved to serve companies' outsourcing needs. It's true that outsourcing can save money, but that's not the only (or even the most important) reason to do it.

One of the major reasons to outsource is the cost cutting. Outsourcing releases capital for investment elsewhere in businesses, and allows businesses to avoid large expenditures in the early stages of your business. Outsourcing can also make your firm more attractive to investors, since you're able to pump more capital directly into revenue-producing activities. Companies that do everything themselves have much “higher research, development, marketing, and distribution expenses, all of which must be passed on to customers”. (Habert, 2002, sec. 1.1). An outside provider's cost structure and economy of scale can give your firm an important competitive advantage. A good outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right...