Advantages and Disadvantages of Outsourcing in a Global Context

This essay discusses the advantages and disadvantages of outsourcing in a global context, including its impact on the global economy. It also provides practical references to support the discussion.

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Introduction
In the current global business state of affairs, outsourcing is one of the major trends being
followed by the contemporary business entities. This process refers to the transfer of the partial
job responsibilities to the external or third party vendors for value. In the recent time, the process
of outsourcing is initiated to gain competitiveness in terms of cost leadership. This is due to the
reason that with the help of the outsourcing strategy, manufacturing and outsourcing cost will get
lowered (Chen and Xiao 2015). However, the extensive approach of the outsourcing process is
also putting a number of disadvantages that might pose challenge not only for the businesses for
also for the global political economy. Thus, it is important to review both the advantages and
disadvantages of outsourcing and the role it plays in a global context.
This essay will discuss about the major advantages and disadvantages for outsourcing and
how it is affecting the global economy on the basis of a few practical references.
Advantages of outsourcing
One of the major advantages of outsourcing is being gained by the developing and
underdeveloped countries. This is due to the reason that with the initiation of outsourcing, large
scale companies based in the developed economies transferred their job roles to the vendors in
these countries. The average cost of resources such as human resources in the developed
economies is significantly more compared to that in the developing and underdeveloped
countries (Dutta, Gwebu and Wang 2017). Thus, outsourcing the jobs to these countries is
helping the companies in saving cost of resources. For example, India and China are the two
leading developing economies in the world and are the major players in attracting the global
outsourced jobs. This is mainly due to the reason that these countries are the top two countries in

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the world in terms of population and thus the availability of skilled employees at lower cost is
adequately available. In this case, organizations such as IBM and Vodafone are outsourcing their
customer service process to the vendors in these countries and incurring lower costs.
On the other hand, another major advantage of outsourcing is the increase in the
employment levels. This is due to the reason that the more is the outsourced process from the
outer countries, the more will be the employment of the local workforce. This is further
enhancing the national economy of the countries majorly the developing countries. For example,
the IT sector of India and China are the major contributors in the national GDP of these countries
(Dolgui and Proth 2013). The market condition of the developed countries is also getting
improved by the outsourcing process due to the fact that end products are being offered in more
competitive pricing to the customer and cost effectiveness is being gained. This can be
concluded that mobilization of the global workforce and holistic economical development is
getting possible by the help of outsourcing. Underutilized resources from the backward
economies are getting leveraged with the help of the outsourcing process. This should also be
noted that with the help of the emergence of outsourcing process, associated responsibilities of
the business will also get reduced and it will be beneficial for the business entities to better
concentrate on their core processes (Tjader et al. 2014). This can also contribute in the long term
business development. It can be concluded that in the current competitive business state of
affairs, gaining cost leadership is important for the business organizations and outsourcing is one
of the most effective processes of gaining it. In addition, this is also helping the less privileged
countries in competing in the global scenario and gain advantages with their available resources.
Disadvantages of outsourcing

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Even though there are few advantages of outsourcing are identified, still a few
disadvantages are evident. One of the major disadvantages of this process is the job loss in the
developed economies. This is due to the reason that majority of the large scale companies based
in the developed economies are transferring their jobs to the outsourced partners and thus the
home country employment rate is getting down. For example, the recent surge in the
unemployment rate in the United States is mainly due to the lack of jobs and these jobs are
getting done by lower cost from the outsourced partners. Hence, on one hand, employment rate is
getting increased in some countries while some other is facing increasing threat of
unemployment (Brewer, Ashenbaum and Ogden 2013). It is also reported that initiation of
outsourcing policy is also promoting the negative impact of globalization of economical
interdependence. This is due to the reason that with the emergence of the outsourcing strategy,
economical sovereignty of the countries is getting affected. For example, economies of the
developing countries where the outsourced jobs are getting done are dependent on the economies
of the developed countries. If the economy of the developing countries is getting challenged,
then the large scale corporations based there will reduce their outsourced operations and will
affect the economies of the developing countries (Größler et al. 2013).
In terms of the organizational context, the major disadvantage of outsourcing is breach of
privacy. This is due to the reason that in the case of outsourcing, certain organizational affairs are
being transferred to the external vendors and this is causing involvement of the external
stakeholders in the organizational decision making process. Quality control factors can also be
challenging for the organizations in following outsourcing process. For example, the customer
care service of Amazon is being maintained by the outsourced partners in India (Gunasekaran et
al. 2015). Thus, the probability of maintaining the desired quality of customer service by

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Amazon of getting hampered is high. The actual quality of the customer service process by the
outsourced partner might not get matched with the expected results. This will affect their
competitive advantages in the long term. Risks of facing unethical branding and image are also
more in the case of outsourcing (Gobble 2013). For example, the production facility of the
Primark and Zara is outsourced in Bangladesh and the outsourced partners are accused for ill
treatment of the employees. These issues will not only affect the brand value of the outsourced
partners but also the outsourcing ones. The global brand image of the companies will come at
stake.
Conclusion
This essay concludes that outsourcing is one of the major and emerging trends in the
recent time and is inevitable in nature. It is also identified that outsourcing is helping in optimal
utilization of the resources in global approach and mobilization of the human resources. Thus, if
compared from the perspective of the global scenario, the average rate of employment is getting
increased. Hence, the trend of globalization is better promoted by this. However, on the other
hand, emergence of outsourcing is also posing challenges for a few countries in terms of
managing their employment rate. In addition, the organizational processes are also getting more
complex with the involvement of the external vendors, which might affect the long term business
potentiality. Lastly, it can be concluded that outsourcing play the role connecting the different
organizational goals and objectives along with connecting the economies across the world. The
developing and underdeveloped countries are the major beneficiaries of the outsourcing process
compared to the developed countries.

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Reference
Brewer, B., Ashenbaum, B. and Ogden, J.A., 2013. Connecting strategy-linked outsourcing
approaches and expected performance. International Journal of Physical Distribution &
Logistics Management, 43(3), pp.176-204.
Chen, K. and Xiao, T., 2015. Outsourcing strategy and production disruption of supply chain
with demand and capacity allocation uncertainties. International Journal of Production
Economics, 170, pp.243-257.
Dolgui, A. and Proth, J.M., 2013. Outsourcing: definitions and analysis. International Journal of
Production Research, 51(23-24), pp.6769-6777.
Dutta, D.K., Gwebu, K.L. and Wang, J., 2017. Strategy and vendor selection in IT outsourcing:
is there a method in the madness?. In Global sourcing of services: Strategies, issues and
challenges (pp. 451-477).
Gobble, M.M., 2013. Outsourcing innovation. Research-Technology Management, 56(4), pp.64-
67.
Größler, A., Timenes Laugen, B., Arkader, R. and Fleury, A., 2013. Differences in outsourcing
strategies between firms in emerging and in developed markets. International Journal of
Operations & Production Management, 33(3), pp.296-321.
Gunasekaran, A., Irani, Z., Choy, K.L., Filippi, L. and Papadopoulos, T., 2015. Performance
measures and metrics in outsourcing decisions: A review for research and
applications. International Journal of Production Economics, 161, pp.153-166.

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Tjader, Y., May, J.H., Shang, J., Vargas, L.G. and Gao, N., 2014. Firm-level outsourcing
decision making: A balanced scorecard-based analytic network process model. International
Journal of Production Economics, 147, pp.614-623.