What are the negatives to outsourcing for the company?

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Rauj T asked:


Let’s say I’m Steve Jobs, and I own Apple. Why should I hire American employees, when I can outsource to India, and reduce my cost, and increase my profit ratio?

I know outsourcing is bad for the Economy, but is it bad for the company. If the US economy is on a down slope I always have other countries to by my product.

So how is outsourcing bad for the company? I never took economics, so be gentle.
That doesn’t seem so bad. I think I’ll outsource when I own a company.

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2 Responses to “What are the negatives to outsourcing for the company?”

1. harchickgirl1 on February 2nd, 2009 11:33 am

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   Okay. I can answer this question for you, and I can be gentle!

   My husband works for a very large bank in Australia. They outsource a lot of their IT work to India. It is good for the company because well-educated people in India will work for a lot less money than well-educated people in Australia. The bank saves a lot of money on salaries, and gets the same result.

   But it is also bad for the bank. India is five hours behind Australia, so my husband has to wait until 2pm (9am India time) to ask anyone a question, even though he has been at work since 8am.

   Once he leaves work at 6pm (1pm India time), people in India have to wait until the next morning to ask him a question.

   That’s an awful lot of wasted hours when no one can talk to each other. Wasted hours mean wasted productivity mean money lost.

   Also, if there is a major problem and the different problem-solvers have to get together to work on a solution, some have to fly overseas to meet the others.

   If people in a normal office are new, i.e. get hired, everyone just walks around, says g’day, maybe goes for coffee, and gets on with the job.

   If people in an overseas office are new, it takes a lot more time to get to know each other via email and phone and to figure out strengths and weaknesses, who are the mentors and who are the useless drones, whom to go to for advice, etc.

   Again, wasted time means wasted money.

   So why would big companies ever outsource? Well, you can measure money, but it’s harder to measure time. The only measurement of success in many companies is the bottom line. So they would rather save money and waste time, than spend money and save time.

   You are starting to get the picture.

2. Mobius on February 3rd, 2009 4:52 am

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   One of the primary issues with outsourcing is that it can lead to a country losing the ability to manufacture certain products on its own, should the need ever arise. That, is a sense, makes a country vulnerable to the whims of foreign governments. Stuff like Apple software, etc. may not appear to be such a bad thing to oursource, but consider the fact that the leading electronic component companies are all foreign owned with the exception of someone like Intel. Lets say that the military needs a new widgit for the troops and they require integrated circuits that are all made “offshore”. What threat could that pose to our national security? I worked for a company that made military GPS and the government needed to make sure that there were at least a couple of American companies who could manufacture the security sensitive parts needed. The previous responder answered many of the other economic related concerns.

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