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outsourceOutsourcing is not a new phenomenon, since the industrial revolution business has outsourced activities in order to concentrate on their core capabilities. Transport into store and delivery to customers is a good example of this. Few large businesses run their own fleet anymore preferring to utilize transport companies who specialize in distribution and have the critical mass and expertise to deliver goods in the most efficient and effective manner.

The word outsourcing however is relatively new and was created to describe the decision by businesses to find external suppliers to either perform their transactional processing or to provide their customer contact services. The supplier market for these services is relatively young with the first companies entering the market in the late 1990s.

Although the industry is still in its infancy transactional service and customer contact companies are developing expertise in their field and using state of the art technology to provide high levels of service at a lower cost than companies can do it in house.

No other outsourced industry has had artificial constraints imposed upon them so why would we consider placing artificial constraints on this new industry? The two arguments for imposing constraints usually relate to the levels of service being obtained from these new companies and the loss of jobs to overseas locations.

Preventing companies from outsourcing transactional processing or customer contact activities will not guarantee high standards of service. The service level provided to customers is set by the company and in the case of outsourced activities is underpinned by either contract or contract and service level agreement.

The best way to address inadequate service is to complain directly to the company and if dissatisfied change your brand. Artificially constraining a company from outsourcing is more likely to cause the company to become uncompetitive and force an increase in prices than an increase to service levels.

Some companies have chosen to move these activities to outsourced providers located overseas where arbitrage costs are lower and as a result local people are made redundant. Since the time of the industrial revolution jobs have been lost to more efficient or lower cost methods of producing the result and over time the population becomes retrained in more highly skilled fields.

Every day people are made redundant because of the introduction of new technology. Jobs in photographic film development have all but disappeared due to the introduction of digital cameras, should we recall all digital cameras and ban their sale because their use has caused people to be made redundant?

It is also worth noting that in the field of information technology there are companies in the USA who provide around the clock support and disaster recovery facilities for companies located all around the world. Should we prevent these companies from taking on foreign clients because people in those countries will be made redundant?

For employees working in the field of transactional processing or customer contact the new world of outsourcing actually opens up new opportunities for career advancement. Not all outsourced companies are located overseas. IBM and Accenture have well developed shared service centers that operate in the USA, Europe, Australia and other countries, they hold large contracts and see service as their product.

Under this model activities that were once considered back office are now the primary purpose. No longer do employees have to do their time before getting a 'real job' in sales or production and for those who enjoy customer service a long term career path is now available within these service organizations.

Outsourcing of customer contact and transactional processing activities is barely a decade old. As a strategy to remain competitive it is so far proving successful. Short term some job losses are experienced however in the longer term the employment market will adjust to these changes as it has done in the past. To place constraints on outsourcing will restrict companies' ability to operate competitively and will result in many more job losses than are being experienced now.
Suggested Reading: Smartsourcing: Driving Innovation and Growth Through Outsourcing

 

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