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At the beginning of the 21st century, outsourcing is viewed as a strategic tool that helps organizations to expand their activities and increase profits. Outsourcing is often seen as an opportunity to provide a competitive advantage and increased value for the enterprise. The main causes of outsourcing are prices and wages, communication and transportation costs. The main factors to reject outsourcing strategies are lack of financial resources and the size of the company. For a small company, it would be more difficult to expand its activities and sustain stable growth rates and flexibility.
The main risks associated with outsourcing are reduced flexibility, low-cost savings and low quality. The problems of structural adjustment are even greater for developing countries that lag far behind the advanced industrialized economies in their flexibility to cope with these challenges. The benefits associated with outsourcing involve strong competitive advantage and cost savings. The extent of this ‘catching up’ is dependent on many factors, such as the political, cultural, economic, and social infrastructure, and the capability of the country to benefit from technological spill-overs and accumulated technology (Doig et al. 2001).
Causes of outsourcing
In cases where this is technically possible, the cost advantage of outsourcing will probably apply to component parts of production processes, leading to outsourcing by the developed economies. When rules limit direct investment and outsourcing, both producers and labor want enforcement of labor standards abroad to maintain competitiveness for their products. Once the rules are relaxed, the interests of producers and consumers diverge, as low wages and lax labor standards make foreign production more profitable. The threat to move all or part of production abroad can be used at home to exact reductions in labor compensation (wages plus benefits). Moreover, the threat of significant job losses allows large firms to demand changes to labor legislation that further weaken labor. In addition to endangering jobs, wages, labor standards and union powers, globalization also hastens the decline of social safety nets. Citing international competitiveness, the business has been able to shift the tax burden to labor. But job losses and low wages will erode this tax base, reducing governments’ ability to finance welfare programs. Globalization thus undermines labor strength, reinforcing the impact of higher levels of overall unemployment on capital’s ability to control the workplace in the developed economies (Cocheo, 2004).
What is different today is the frequency of these changes and the greater cataclysmic effect for the individuals involved. But a simple fact remains: At the point where work gets done, workers are functioning at various levels of skill and knowledge and adapting to a variety of physical, social, and environmental conditions to perform tasks to specified standards. Those tasks must be documented and understood by HR specialists so they can apply their measures, generalized tools, and consulting skills to help select workers, train them, appraise their performance, give them constructive feedback, and adapt their environments to achieve optimum productivity and worker growth. To begin with, its task formulations come directly from SMEs in their own words. They are revealing as no checklist can be because they link the essential information that must be linked–behaviors and results. This is the information necessary to understand the work-doing system and manage its HR dynamics. Continuous involvement of an HR staff member to implement findings, and if feasible, to extend its application to other occupations is desirable (Cocheo, 2004).
Careers provided opportunities for individuals with potential and determination to aspire toward goals that enabled them to achieve comfortable economic status. It provided employers with dedicated employees. As the new millennium approaches, the pursuit of careers appears to be in a state of flux. The turmoil in the industry brought about by global competition and industrial consolidation has shaken the concept of stability and the idea of lifelong employment in a single occupation for a single employer. Employers are less able to offer lifelong employment in a clearly defined occupational niche (Gordon and Zimmerman, 2007). Technological change and the enormous expansion of knowledge have blurred the lines of career content. Today, it appears, nothing less than lifelong training and education is necessary to stay current let alone get ahead in a career field. It is not that the idea of pursuing a career is no longer feasible. Rather, a career–in the sense of achieving stability, security and personal growth must be pursued differently. The primary focus of these goals has moved from the employer, industry, or profession, to the individual. An individual can no longer rely on a career label, even a licensed one, to provide the niche of security, stability, and status. Instead, an individual must be able to deliver high performance in highly changing situations (Doig et al. 2001).
In sum, outsourcing helps companies to improve their main operations and service quality, gain a competitive advantage and save costs. It proposes company opportunities to reduce labor costs and increase service volumes and a number of traditional services proposed to customers, restructure the business and invest in personal growth and development. In such an environment, workers require personal flexibility and self-insight that can be honed by career development coaching.
Cocheo, S. (2004). Global think or Job Shrink: Offshore Outsourcing Brings Some Banks Key Benefits. If Only It Didn’t Carry All the Cachet of Leprosy. A Look at What’s Actually Happening. ABA Banking Journal, 96 (1), 40.
Doig, S. J., et al. (2001). Outsourcing Gone Too Far? The McKinsey Quarterly, 2001, p. 25.
Gordon, C., Zimmerman, A. (2007). High-Tech Outsourcing: A Benefit-Cost Framework. American Economist, 51 (2), 97.