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Uncovering the Leading Misconceptions about Outsourcing

The term Outsourcing has a “dirty” reputation, with an unfortunate negative connotation. Often, the word is associated with cheap labour, human exploitation, and unemployment. What makes these correlations unfortunate is that the reputation was built through misinformed, one-sided perspectives of the term. This post aims to cover the reasoning behind these misconceptions and provide further insight into the true meaning of outsourcing.

What is Outsourcing and What Are The Main Misconceptions?

Outsourcing is the production of goods and services from outside sources, especially from a foreign or nonunion supplier. A common misconception is that people imagine it to always be done in an offshore country, such as India. Although this can be the case, it can also be as simple as hiring a company down the street rather than having work done in-house. Software development outsourcing is a general term which can be split into software offshoring and nearshoring, you can read more about this on another one of our articles. This practice is utilized in all types of sectors including, Human Resources, R&D, Call Centers, and Manufacturing.

GSA conducted a survey which provided insight on what the general public is able to identify as “Outsourcing”. Participants had to select from a list what they would consider a form of outsourcing. Only a staggeringly low 27% were able to identify  “A local computer company providing IT support to small businesses”.  According to GSA, this is “a classic example of true software development outsourcing”. This means the general public has an incomplete definition of the term. Next, we will discuss how the lack of knowledge on the topic has aided its dirty reputation.

Which of the following do you think describe an example of outsourcing?
Graph 1
Which of the following do you think describe an example of outsourcing?

Leading Causes Behind The Dirty Reputation

When you know little about something, the first thing you read or hear may be what you start to believe. The same survey conducted by GSA showcased that the terms strongly associated with outsourcing, are predominantly negative (See Graph 2). Below we break this down and explore the accuracy of the definitions.

What words do you associate with outsourcing?
Graph 2
What words do you associate with outsourcing?

As seen above, “Job Losses” is the second most associated term with outsourcing. First, let’s re-establish that it is a lot more than just finding cheap labor. Remember, hiring a company down the street to do a job for you, is outsourcing. Research demonstrates that while, yes, there is a loss of jobs, it also results in the creation of jobs. Taking the U.S for example, from 1996 till 2006 an average of 7.83 million jobs were lost each quarter, but 8.17 million new jobs were created. The rate at which insourced jobs have increased in the U.S is larger than that of jobs lost. Finally. research has also suggested that less than 1% of those lost jobs were a consequence of outsourcing.

Terms like “Rip-Off” and “Fear” have arisen through the false ideations that Outsourcing is likely to backfire on a company. People often fear that lower pricing signifies lower quality. This is definitely not always the case. It is important to remember that the changes in pricing are highly related to the costs of living in different countries. Working with companies at a long distance with high barriers of communication creates the fear of a scam or increase the risk of failure. In reality, offshore and nearshore software development will reduce some of the risks involved and will be more cost-effective.

What To Take Away From This Post

Now, we are not suggesting software outsourcing will never result in a rip-off or that you will never receive a product or service below your expected standard. However, like all business decisions, if you do your research thoroughly, you will reduce the risk and you will be more likely to have an effective experience.

  • Outsourcing can be something as simple as a local computer company providing IT services to a small business
  • There is not a strong correlation between outsourcing and job losses
  • Through doing appropriate research, you can avoid scams. This way you can find the best companies to outsource your software development to.
  • The reputation behind the word has been a cause of lack of information and narrow perspective on what it entails.

At Eastsource we work with established development companies specializing in cutting-edge technology. We have done the necessary research and due diligence to guarantee your confidence. During your project, we make sure the communication and service quality is of utmost importance.

Header image designed by mindandi / Freepik

Author: Ana Sofia Barrera Abisad

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