Outsourcing is a broad term that is used to describe the practice where a company contracts with a third party service provider to handle its manufacturing or business process requirements or its product design and development tasks. An outsourcing arrangement allows a company to offload tasks that are either too complex for them to handle or can be performed more efficiently and cheaply by a third-party provider. For a small business or a big one, the reduction in costs and the quick access to specialized skills that outsourcing can bring have a huge upside. For many companies outsourcing allows them to focus on their core competencies while the repetitive and mundane tasks are handled by service providers.

Automobile makers have been outsourcing manufacturing jobs to third-party contractors within the U.S. and overseas for several decades now. More recently a growing number of manufacturers of other consumer and durable goods products have also been tapping offshore outsourcing opportunities in a bid to drive down operational and product development costs. The biggest beneficiary of outsourced contract manufacturing jobs has been China. However now other numerous other Asian, European and Latin American countries have also benefited from the trend.

Increasingly the term outsourcing has been used to describe contract work involving information technology. Products and services, technology research, human resources, call center and customer service operations and marketing functions are some of the latest examples. Companies looking for helping developing new software applications or maintaining old ones, those looking for expertise in specific technology areas and those seeking to complement their existing resources are turning to offshore vendors in growing numbers. The growing connectivity and communications capabilities enabled by the Internet are allowing companies to quickly and easily farm out jobs in these areas to third-parties.

The huge cost benefits that can be derived by shipping work to companies in relatively low wage countries such as India, Russia, China, Ireland, Singapore and Israel have resulted in a massive spike in offshore outsourcing over the last ten years. Today almost all of the Fortune 500 companies outsource their IT and BPO requirements to low-cost offshore destinations. The trend has caused considerable alarm among many people who see offshore outsourcing posing a threat to U.S. jobs and the U.S. economy. The fact that offshore outsourcing can sometime lead to workforce reductions has added to the alarm and made it a hot button item on the political front.

Proponents of outsourcing however argue that over the long-term the trend can have a beneficial effect on the global economy. The surging economies in countries such as China and India were fueled initially at least by outsourcing. The huge demand for Chinese manufacturing skills and India’s highly-skilled scientific and IT capabilities have triggered rapid economic growth and prosperity in both countries. This in turn has made both India and China huge, attractive markets for companies in Europe and North America.

With numerous other countries vying to emulate the impressive successes of China and India, competition has been heating up in the outsourcing arena. Similar economic transformations are beginning to take shape in other popular outsourcing destinations. All this results in more opportunities for companies in countries that are doing the outsourcing. It can also be very beneficial for your company to get on board this new phenomenon.

Encorpus provides small business consulting and strategies for business startups, product launches, marketing or business development. Encorpus customizes and personalizes every strategy, advisory session or business relationship to you and your company’s special DNA.

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