Contrary to common perceptions about outsourcing, not all projects are being sent overseas. Known as “homeshoring,” call centers are moving to living rooms, where individuals are connected via telephone systems to national customer service lines. One company, Arise, for example employs more than seven thousand agents in nearly every state who work from home keeping overhead low.
Sourcing projects within the United States generally includes a team of freelance professionals, primarily with the job functions of web developers, virtual assistants, and writers. Employing an American staff is more expensive than India, for example, but the quality and range of skills within the workforce is broader and therefore more appealing to companies searching for top-quality resources.
Even war is being outsourced: America employs more contract workers in Afghanistan than regular troops.
Outsourcing has transformed global business. Over the past few decades companies have contracted out everything from mopping the floors to spotting the flaws in their internet security. TPI, a company that specialises in the sector, estimates that $100 billion-worth of new contracts are signed every year.
Outsourcing was not formally identified as a business strategy until 1989 (Mullin, 1996). However, most organizations were not totally self-sufficient; they outsourced those functions for which they had no competency internally. Publishers, for example, have often purchased composition, printing, and fulfillment services.
Outsourcing can happen both th[r]ough transaction by firms, like phone call centers staffed in Bangalore to serve costumers in New York and x-rays transmitted digitally from Boston to be read in Bombay, or with direct consumption purchases by individuals, like when someone hires an offshore firm to provide plans for redesigning or redecorating a living room.
Entertainment businesses outsource some work, like nonunion orchestras in Eastern Europe recording film scores, but the bulk of creative work is done close to home and in the hubs of New York, Los Angeles and Nashville.
Drew Smith, a musician, used a dance school in Bangalore, India, to make a video for his song “Smoke and Mirrors.”
India, ranked first in our survey, provides the best mix of factors, but it is not a leader across all dimensions. It is still a highly cost competitive location, but recent wage inflation has impacted its position relative to other countries. India also has a massive resource and skill base, but educational challenges are impacting the skills of graduates and the business & economic environment can prove taxing.
There are no simple criteria to conduct an outsourcing versus in-house analysis. The benefits associated with outsourcing are numerous, and one should consider each project on its individual merits. Ongoing operational costs that may be avoided by outsourcing are also a consideration.
One particular outsourcing advantage is the reduction of overhead costs. Come to think of it. If you want to hire more employees but don’t have the office space for it, you may face certain expenses for setting up an office extension or something like that.