The following essay is a comparison of the article “Process Outsourcing Benefits” written by Duran and Duran and the article “Fair Exchange: Who Benefits from Outsourcing?” written by Barrera. The articles talk about the outsourcing of services by companies that operate in developed nations to those companies that are found in developing nations. The outsourcing practice has increased in the recent past, and the increase can be greatly attributed to the increased use of information technology that has significantly improved communication. The firms that outsource services range from small through medium-sized to large organizations. In most instances, the firms that contract other companies for a given task also can carry out the outsourced tasks domestically but opt to outsource their service mainly because of economical reasons. It has emerged that services that did not appear to be tradable are now in high demand and form the outsourcing basis. All functions needed to run a company can now be obtained off-shelf (Wadhwa, 2009). Firms contract other organizations for services like data management, accounting, editing, data analysis and processing, call center services, or e-mails among many others. The supplying firms are highly specialized in the respective areas and can offer the services at cheaper costs as compared to the whole costs that would be incurred by a company performing the tasks in-house.
Outsourcing of services to developing nations by firms located in developed nations such as the United States of America has currently increased considerably. In the article “Fair exchange: Who benefits from outsourcing?”, Albino Barrera focuses on the benefits of outsourcing and asserts that the practice is beneficial to both parties involved in outsourcing and also to the respective countries involved. However, the author also points out that the practice has some weaknesses that have to be addressed by the policy-makers to ensure its effectiveness. Outsourcing of services by firms operating in developed nations to developing nations has raised a lot of outcries. The outcry has occurred because outsourcing of services by these firms denies residents in developed countries employment opportunities. On the other hand, those companies that outsource services help to create employment opportunities in the developing nations where they outsource these services. However, Barrera (2004) views this practice as being beneficial to the two parties involved. That is the outsourcing firm and the service suppliers plus their respective countries.
Although Barrera (2004) supports the outsourcing process, he points out that the outsourcing process should be regulated since the practice is heavily being blamed for the rising level of unemployment in the United States. Wadhwa (2009) terms it as a dirty word that involves denying full-time employees in the United States of America an opportunity to earn a living. Instead of these companies helping the United States of America to reduce unemployment, they help to create employment opportunities in foreign countries at the expense of the welfare of the American residents. The United States is regarded as a destination for outsourced jobs, a move that agonizes most jobless citizens. The companies outsource these services since the costs of outsourcing these services are lower compared to having these tasks being performed in the United States of America.
Barrera (2004) observes that employees in developed countries lose their jobs due to outsourcing of services since similar well-paying jobs cannot be created at the same rate. There is often a large time interval between the destruction of jobs and the creation of other opportunities. The employees may be forced to seek employment in new fields in new geographic locations. This would necessitate additional training to acquire the relevant skills and adaptation to the new work environment. Outsourcing is also characterized by increased use of high-tech and occupational services that have rendered many employees jobless (Barrera, 2004).
The outsourcing of services is known to possess several weaknesses. For instance, organizations that outsource services may not be in touch with some of their key stakeholders. Thus, poor relationships may arise between the suppliers or consumers and the business organization that impedes its smooth operations. Similarly, the company becomes so much dependent on outsourced services that it may fail in case there is a sudden withdrawal from the contract by the supplying firm. In this regard, it has been pointed out that a firm should evaluate the other organization providing outsourcing services before contracting it (Duran & Duran, 2009). Different aspects like cost, time, and quality of the services have to be considered.
The increasing rate of outsourcing as witnessed in the United States can be supported by several observations. Various developments have been witnessed in the business industry that justifies the use of outsourcing. The current international trade that involves shifting resources to gain a comparative advantage is the fundamental building block behind outsourcing (Barrera, 2004).
Firstly, outsourcing is cost-effective and helps increase the profits of the organization. It is aimed at minimizing cost and time for a given task (Duran & Duran, 2009). Outsourcing is not a recently developed idea in the United States. The idea had been in existence whereby the country obtained goods from other countries where they could be produced cheaply. The companies manufactured products from those goods and sold the finished products to other countries. Barrera (2004) supports this practice and asserts that it is needless to produce some products using many resources when similar products could be obtained elsewhere at cheaper prices. Those resources could be channeled to the production of the other products that were of high value to the organization. Many companies operating in the United States of America outsource their services to developing nations since it is economical for them to do so than perform them locally. Increased global competition and the economic pressure caused by developing countries call for replacing full-time employees with contractors (Wadhwa, 2004).
The firms that offer outsourcing services do not incur huge operations costs like consumer benefits or other overhead expenses. The firms make use of few employees with highly specialized skills. As such, they are able to provide the services at relatively cheaper costs to the client organizations. Thus, outsourcing allows the developing and the developed countries to developing the products and services that are of the highest possible benefit to the country (Barrera, 2004). The US companies that outsource services have a lean organizational structure that allows improved operations to gain a competitive advantage in the international market.
Secondly, the quality of outsourced services is often high. The quality, time, and cost should be the major focus of an outsourcing company (Duran & Duran, 2009). It has been observed that small business organizations need certain technology services and yet they are not equipped to perform the tasks (Wadhwa, 2009). The firms offering these services often streamline their operations towards specialized lines. The companies can employ modern technology and machinery that may not be available in the client organization. This implies that if the firms withdraw their services for the client organizations then the latter can suffer the consequences of poor quality services.
Duran & Duran (2009) and Barrera (2004) concur that as much as outsourcing is blamed to cause unemployment in developed nations, the practice improves the lives of the poor in developing countries. Outsourcing of these services increases the level of employment in the developing nations consequently contributes significantly towards social and economic development in these countries. This helps to alleviate poverty and improve the lives of the citizens of developing countries thereby contributing towards the desired global development. This is advantageous to the large international organizations that operate across several countries.
After comparing the two articles, it is clear that both articles depict that outsourcing is currently growing at a considerable rate and its positive impacts on economic development at the local and international scene are evident. Barrera (2004) points out that all parties and countries that are involved in outsourcing benefit from it. He explains that outsourcing helps developing counties create employment opportunities for their jobless youths. On the other hand, Duran & Duran (2009) notes that outsourcing helps outsourcing companies cut down their cost of operations and at the same time receive high-quality service since the outsourcing companies work with those companies that engage few, but highly experienced personnel.
Barrera, A. (2004). Fair exchange: Who benefits from outsourcing? In L. G. Kirszner & S. R. Mandell (Eds). The Blair Reader: Exploring Issues and Ideas.(pp.454-458). Boston: Prentice Hall.
Duran, D., & Duran, I. (2009). Process outsourcing benefits. Annals of DAAAM & Proceedings, 945-946. Web.
Wadhwa, V. (2009). Outsourcing Benefits U.S. Workers, Too. BusinessWeek Online, 5. Web.