Good morning! Here’s your drama-packed Thursday edition of Gone Global, keeping you at the top of the global corporate game. Let’s dive right in!

Outsourcing: A Controversial Topic with Severe Economic Implications

Offshore outsourcing has been a controversial topic for years, with many people hotly debating whether it’s hurting or helping the US, UK, or [insert your country] economy.

While many argue that offshore outsourcing leads to job loss and wage stagnation, others believe it can lead to increased productivity, cost savings, and economic growth.

Below, we lineup a few arguments for and against. Handy tip: If you’re out looking for a bar fight, some of these arguments might help you find one.

Economic necessity

Outsourcing has become a necessity for first-world companies to remain competitive. It allows companies to reduce costs and increase efficiency, which is essential in today’s global marketplace.

In the words of Lee Kuan Yew (former founding father and prime minister of Singapore), “If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”

It (almost) goes without saying that outsourcing offers incredible cost savings and efficiencies. The differential in salaries means that clients can save as much as 70% on employment costs.

Using an outsourcing firm also allows companies to focus on core tasks, delegate non-core and administrative functions, and allocate and scale resources more efficiently.

Job destruction creation

Surprisingly, studies have shown that offshore outsourcing can actually lead to lead to net new job creation in the home economy, including a study by Southwestern Economic Review identifying the potential for economic stimulation and increased jobs4.

If you don’t believe the studies, just look around…

Outsourcing has been happening at a huge scale for the last 30 years, moving millions of jobs offshore. However, unemployment levels remain at record lows (excluding covid anomalies), demonstrating that the specter of “outsourcing will take all our jobs” is false.

Also, while some people feel that outsourcing is akin to exploitation and ‘slave labor’, the reality is very different. Multiple studies show that outsourcing leads to significant economic growth in both the outsourcing and vendor countries6.

Global market expansion

Lastly, offshore outsourcing enables US companies to enter new markets and expand their global reach – which in turn leads to further exports and economic growth for the home country.

One thing is for sure, as the global marketplace continues to evolve, offshore outsourcing will continue to expand and remain a competitive necessity for Western companies.

The question for your business

Has the fear of controversy impacted your adoption of outsourcing?

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