First Person: The Pros and Cons of Outsourcing

Many Americans don't like to talk about or even think about outsourcing; I know I don't. It goes against everything most of us were taught in Business 101. Businesses are supposed to recognize their responsibility to the social structure in which they exist.

But outsourcing became popular nonetheless. Whether or not your business outsources depends how you feel about outsourcing, and the first question you will have to answer is, "Do I think it is moral with respect to American workers?"

What is outsourcing?

Actually, outsourcing simply means contracting some of a firm's regular duties to an outside company. It was considered a good practice initially.

For example, I worked for many years for a third-party administrator. We sold insurance. However, the act of approving policies through underwriting and paying claims was also done by us. The idea was that the customer would get much, much quicker service because their work would not have to be transmitted to the insuring company. It was a win-win-win situation. The carrier (insurance company) didn't have to hire people to do the work we brought to the table, but still had, through periodic visits, control over our quality of work. We made a profit from doing the extra work and benefited, as did the carrier, from extra business because we could offer faster service with respect to claims. The client benefited from faster (and local) service.

Outsourcing was and is used by companies to let other companies do certain tasks for them so they can concentrate on their strengths.

What is wrong with outsourcing?

The short answer to the question is: "Used correctly, nothing is wrong with outsourcing."

What has happened is that instead of outsourcing for better results, firms have sent certain functions overseas to countries like India and China simply to take advantage of cheap labor.

There are two problems that have arisen from this. The first is that, whereas the method of outsourcing in this country didn't cost any jobs, by sending the work to another country American jobs were and are lost. The even larger problem, the problem that more directly affects companies, is that of quality.

When a firm outsources to countries like India or China they often lose control of quality.

"Is it worth the savings to possibly lose our good name?"

Our local cable company, as many companies have done, has outsourced its "help lines." I do not know what country the phone help is from but I cannot understand them. It takes me 20 minutes to get a problem solved whereas it used to take me five minutes and now after the call I feel frustrated.

The reason the cable company can get away with it is most people don't want to take the time to reset their cable service, internet and phone so they just put up with the frustration.

Is outsourcing right for my company?

Recently firms have begun to use outsourcing a little differently. Rather than look at it as a cheap labor source they are using more quality personnel to do jobs such as research and development in conjunction with employees in the United States. This gives the firm in question a leg up on the competition because development moves forward at lesser cost which can even allow for hiring in the States for the increased work from the joint research.

What are the moral implications to my firm?

First, you work in a particular environment. If you outsource to a country overseas is it fair to the people who live by you, work for you and in many cases buy your product(s)? Will it affect your local sales?

Is it fair to my clients to give up quality control? Indeed, do I run the risk of massive lawsuits?

Am I not living up to my social responsibility?

Do I "feel okay" about outsourcing overseas?

Outsourcing can be done at home to try and save work through specialization. Further it can be done overseas when there remains collaboration.

More from this contributor:
A First Person Account of Starting a Business
Patterns and Solving Problems in Business and Life
Reducing Small Business Start-Up Costs: Business Cards, Cell Phones and Marketing