Pros and Cons of Outsourcing Foreign Workers

Thanks to increasing developments in technology, communication, and globalization, managers are no longer restricted by country borders when finding reliable workers. In fact, 300,000 positions are estimated to be outsourced every year, according to Small Biz Genius’ article on outsourcing statistics.

The US is the single biggest outsourcing country in the world, and the global market has come to rely on the income it provides. As globalization increases, it’s important to understand how the industry works, and what this entails for domestic and foreign workforces.

When local talent is not available, sometimes outsourcing can be a great alternative.

PRO: Higher productivity rate

The growing demand on the industry has resulted in a new level of competitive drive. As we’ve discussed in our previous article on Hiring Remote Software Developers, this competition tends to be particularly strong in industries related to tech and data, such as software development. This has consequently created a higher productivity rate that results in great ideas, better professional drive, and faster completion times.

PRO: Reduced costs

Outsourcing piecemeal work tends to be cheaper than hiring permanent full time staff because there are fewer regulated recruitment process. At the same time, outsourcing also reduces the number of real estate assets that companies are required to have to support workers domestically. This lowers the number of operating expenses that occur, as well as tax profiles, overhead costs, and even maintenance costs.

For many kinds of jobs, only a computer and internet connection are necessary, no need to be in the physical office. These roles are good options for outsourcing.

CON: Rash hiring

The appeal of cheap and quality talent in a competitive workforce can sometimes cause companies to hire rashly. When candidates aren’t properly vetted, this can actually lead to a decrease in productivity and end up as a wasted expenditure.

In LHH’s feature on competing for top talent, keeping your head is considered to be an important skill during this time of über competitiveness. Many tech companies overpaid and overhired during the pre-2008 talent shortage, and subsequently had to let this talent go during the recession. It’s important to stick to the best practices in your hiring processes, and invest in finding talent that truly adds value to your company.

The tip is being agile and not rash. Additionally, by tying increased salary and bonuses to performance, companies are able to compete without breaking the bank.

PRO: Access to a global pool of talent

Through outsourcing particular tasks, companies are able to access a global talent pool that would’ve otherwise been beyond reach. This allows management to substantially improve performance by drawing on the niche skills from experts in certain fields.

Take the IT industry market in Ukraine as an example, wherein IT outsourcing trends for 2019 led to the $5.7 billion value of their quality IT work in 2020. Benefits outlined in Forbes’s article on global talent touched on the fact that businesses had to adopt remote work models to adapt to a life of social distancing. Thanks to that newly found flexibility in remote work, businesses were then able to take advantage of the broadening talent pools.

More diversity, stronger thinking partners, and better overall morale allowed for more stable work and life balance. The niche industries, new ventures, and expansion efforts are only opening up a new playing field for both employers and employees.

CON: Tighter local job market

Outsourcing means that Americans could potentially lose their jobs. In fact, the New York Times’ write-up on job layoffs reports that since the economy has reopened after the pandemic it has ignited a war for talent. Job cuts rose 6% in April over the same month in 2021, and nearly 8,700 people in the financial services sector lost jobs from January through to April – most of them in mortgage banking.

There can definitely be some cons to outsourcing. There’s something to be said for not only serving the local market but also hiring from the local market. It’s important to carefully consider when outsourcing might be or not be appropriate.

Yet, several clients in the high-growth technology space focus on outsourcing in order to reduce costs. The operating environment has thus led to an increase in demand for growth in offshore work and a decrease in demand for onshore work. Many are thus calling for federal restrictions, lest a recession from unemployment and surplus threatens the local economy.

Outsourcing has its pros and cons, and it’s up to businesses to navigate through these minefields carefully. Fortunately, tools and services that improve communication between global projects — such as IVANNOVATION’s translation, localization and interpretation services — are available to help meet the ever-changing needs of businesses across the world.

About the Author: Amelia Baker is a business development and training consultant. In the field for over two decades, she has partnered with several corporations and organizations around the world in pursuit of global excellence.