Is There A Dark Side To Outsourcing?

Typing on laptop

 

Outsourcing by definition is the business practice of hiring a party outside the organization to perform the production of goods or services. Gone are the days of solely performing processes in-house. Even the largest businesses in the world hire outsourcing companies to reduce costs, gain favorable labor laws, and better talent to perform services to increase their bottom line. 

 

After more than three decades of providing services to various industries from all over the world, it is without a doubt that outsourcing had an immense impact on businesses. But all great companies come from somewhere. Whether they worked their way up the ranks of the business world by doing the traditional way of grinding out results or by taking aggressive moves to further their position whether ethical or not. 

 

Globalization has brought tremendous growth and some adverse effects such as unfair trade practices, worker exploitation, and theft of intellectual property. As the era of global interdependency on trade, profit, and services has reached its prime, all industries have their own downsides. 

 

There are different forms of outsourcing such as professional, manufacturing, IT, project, process, and operational outsourcing. Moreover, the geographical locations of outsourcing facilities are categorized into onshore and offshore outsourcing, putting an unaccounted number of business process outsourcing companies into thousands spread across the globe. With such numbers in mind, there will always be bad ones. 

 

In the case of manufacturing outsourcing wherein physical labor is needed for the completion of a product. In a few instances, offshore manufacturing plants exploit outsourced workers in countries which will be discussed later on. It is without a doubt that outsourcing is an effective business strategy. It lowers cost, increases efficiency, and helps businesses focus on core competencies. On the other hand, outsourcing has its consequences as well, regardless if its located within the country or abroad. 

 

Offshore and Onshore Outsourcing 

Offshore outsourcing is when an organization hires third-party contractors outside of the country, while onshore outsourcing recruits within the country. Both categories have their own advantages and disadvantages such as the cost of recruiting, hiring, training, wages, and laws that entail a certain country’s jurisdiction. 

 

Offshore Outsourcing Locations

The majority of the world’s outsourcing facilities have their facilities located in India and The Philippines are known for their low pay-per-hour wages compared to other western countries, the availability of competent talents, and mitigate the risk of involvement in labor cases. With their ability to meet the demands of ongoing business needs in the US, UK, or Australia in the field of real estate, customer service, medical service, and finance to name a few. 

 

Risk To Intellectual Property

One of the critical arguments against outsourcing is the vulnerability of the data being lost, stolen, or compromised. However, does outsourcing really pose a risk to data and intellectual property? It varies from a case-to-case standpoint, cybersecurity concerns, vulnerability of servers to a data breach by malware or hackers, and to the theft of information from staff that has malicious intent. 

 

As mentioned previously, outsourcing relies upon the retention of their services to survive. It is unjust to pin the blame on all of the BPO companies in the world for the fault of a few. BPO companies have a service level agreement (SLA) between clients, and a non-disclosure agreement (NDA) between clients and their employees to protect classified information. 

 

Furthermore, there are additional measures implemented to secure data and intellectual property. Outsourcing companies are continuously improving their cyber security software and protocols, ensuring that the servers are safe and secured. 

 

man on computerWorker Exploitation

The exploitation of labor is using the vulnerabilities of others to one’s own advantage. In this day and age, the term that is often used is “sweatshop”. Sweatshops are usually referred to as places of employment where the utilization of low-skilled workers, often in the developing world are characterized by low wages, long hours, and unsafe working conditions. Essentially, sweatshops produce a large number of goods for multinational businesses, which in turn sell the goods to their customers. 

 

In 2013, sweatshops gained notoriety when more than 1,000 people were killed and over 2,200 injured when a garment factory in Bangladesh collapsed. Since the collapse, the investigation made by the Bangladeshi authorities concluded that the building had illegally added a few stories. As a result, the building could not support the added weight, and eventually collapsed under the sheer pressure of the weight. But the disaster could have been averted, if the factory complied with safety standards, but this would mean that the company would have had to pay for things to be done properly. More often than not, developing countries are prone to corruption and lack effective government regulations to safeguard workers. 

 

Isolated cases of worker exploitation do happen in certain parts of the world. Frankly, when it comes to full-service Business Process Outsourcing (BPO) companies, the employees they hire aren’t low-skilled workers. The services they offer often require a high degree of skill and specialization. The truth of the matter is that offshore outsourcing companies provide better wages, benefits, and workspaces than their local counterparts. In fact, BPOs are one of the largest employers in the Philippines with over a million people working in the industry. 

 

The Bottom Line

Ultimately, as the outsourcing industry continues to grow, whether or not they are white or blue-collar jobs, there will always be people that will try to circumvent regulations to make the most profit at the cost of their employees. If you’re planning to outsource, make sure you do your research and hire an outsourcing company such as Clarkstaff.com.

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