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Why international outsourcing is not always a smart financial move

handshakeoverflags32166713.jpgOutsourcing a portion of your business operations can be very appealing. Looking at the price that some international entities charge for what appear to be the same services, it seems like a no brainer; pay less by having a company in a different country handle some services for you. Some figures estimate the number of international employees hired by American companies to be more than 2 million in number.

But it is not always that simple. Yes it is true that the cost of labor in the states in the customer service/support industry could very easily account for 50-75% of the total costs of a business. This figure alone is enough to entice a business owner to take some of their labor costs offshore and outsource to save money. However, other business owners see serious disadvantages to doing so. In fact, some business owners believe it is against company standards to seek the cheapest option and no invest in their own state-side employees. Nonetheless, it is up to the business owner to weigh the pros and cons and decide for themselves.

Generally, when a business decides to outsource more often than not the company also agrees to sacrifice quality. The amount of quality being compromised often depends on the type of services that are being outsourced. For example, let's say that your health care provider decides to outsource their customer service call center to a foreign county. If you have a question about your policy or a claim, your call will be taken by someone who may not speak English as their primary language. Imagine how frustrating it would be to have your important questions misunderstood by a well intentioned international employee. You will not get the service that you expect, but the business running the call center saves a lot of money. It is definitely a tradeoff that some businesses are simply unwilling to make. This is in no way saying that only U.S. companies know how to provide good customer service, but typically an outsourced call center with low prices is not going to have the resources for employee development and customer service training, it is simply cheap labor. So the question of quality is this; is it more important to offer the lowest price to your customers or to focus on other business factors like customer satisfaction and retention?

If you are thinking that providing your customers with the lowest price is what they want the most, you need to also consider the fact that outsourcing may not always be the least expensive option. Many companies who have previously used offshore services are finding that rising crude prices (the cost of shipping manufactured goods internationally) and rising labor costs are not providing the cost savings that were once widespread. In fact, a study by the AT Kearny consultancy found that "34 percent of the companies it surveyed with operations offshore didn't earn the savings they expected." Many of these companies that put more of an emphasis on cost savings than on improving performance also had a harder time meeting performance goals for their operation. Using the example of employee retention, as a business owner, you can save a lot of money by investing in your employees and reducing turnover than you may be able to save by outsourcing jobs. Proponents of keeping jobs in the country also make the argument that customers associate a fair amount of value in companies that value their employees and have a commitment to the role that their employee play not only as part of the company but also as part of the community. A survey found that almost 70% of questioned consumers feel that it is important to do business with a company that shares their values. So, while it would be incorrect to make the blanket statement that international outsourcing is a bad idea, it is fair to say that it is not the obvious choice if you are looking to save money or have your business grow.

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