The world is shrinking, trade borders are evaporating and it no longer matters where employees work, according to outsourcing entrepreneur Derek Gallimore. He offers a colorful history of global trade and debunks arguments against outsourcing and offshoring, practices he finds give companies a competitive edge and cost savings. Gallimore is in the offshoring business in the Philippines, and he’s openly passionate and opinionated about it. He successfully conveys the urgency he feels about preparing for a new economic reality with an unrestricted global labor force, and he urges companies not to get left behind.
- Outsourcing is becoming a necessity on the march toward a single global economy.
- The internet is democratizing global access to jobs.
- Reduced labor costs are just one of the many advantages of outsourcing or offshoring.
- Due to fear of public backlash, smaller organizations hesitate to embrace outsourcing, which can be a controversial practice.
- Contrary to conventional wisdom, offshoring positively influences the US economy.
- The way you should structure your outsourcing initiatives depends on your objectives.
- Test the waters of outsourcing before you dive into the ocean.
- If outsourcing impinges on your company’s efficiency or creates large disruptions, it may not be the right option for you.
Outsourcing is becoming a necessity on the march toward a single global economy.
Remarkable technological advances – such as video conferencing, smartphones and social media – are commonplace today, but they were unimaginable even at the turn of the 21st century. As the technology juggernaut continues to roll, trade borders are evaporating. People now work, shop, date, socialize and recruit online. Thus, physical office spaces matter less since many employees can work from any place where they have with a computer and an internet connection. The COVID-19 pandemic accelerated the trend toward remote employment, which makes it less necessary for many workers to anchor in a specific location.
“Today, the world is becoming functionally smaller. It will never physically change in size, but functionally, the tyranny of distance is being eradicated.”
The convergence of three trends – globalization, remote work and advancements in technology – suggests that the labor market will transition from local job markets to a single global workforce by 2040. Easy access to a universal labor pool enables employers to hire, say, a qualified accountant in the Philippines for a fraction of the cost of hiring someone who lives in New York.
Though almost every Fortune 500 company outsources to some extent, the notion of hiring people on other continents is controversial. Critics view the practice as unpatriotic, which makes many leaders of smaller businesses uncomfortable. So far, outsourcing isn’t mandatory for sustaining a competitive edge, but it will become so relatively soon. Businesses that reject outsourcing are likely to lose ground to their competitors.
The internet is democratizing global access to jobs.
Until recently, most people worked in the cities, towns and villages where they live. With few exceptions, geography sealed an employee’s fate. Those who grew up in large urban centers within developed countries enjoyed disproportionate access to opportunities, while social mobility was all but impossible for anyone living in poverty in a developing country. Governments, laws and national borders further restricted mobility.
“Outsourcing is just a form of cooperative trade with someone else who can get a job done better, faster or cheaper.”
As technology advances, a single unrestricted labor market – a pool of some eight billion workers – will emerge worldwide, democratizing access to wealth and employment. Earth’s entire population will be able to communicate, trade, compete, collaborate and build together. In the information economy, a physical presence within an office is mostly unnecessary. When workers need only a laptop and an internet connection, conditions are ripe for outsourcing to flourish.
Reduced labor costs are just one of the many advantages of outsourcing or offshoring.
Outsourcing already has become an integral part of everyday life. When you order takeout, you are outsourcing the task of making dinner to a qualified specialist. Perhaps you outsource auto repairs to a mechanic and household maintenance to a handyman. Organizations commonly outsource work beyond their core competencies to specialists. For example, an accounting firm that wants to raise its public profile is likely to turn to a PR firm or an advertising agency.
“Global employment can give you access to deep talent pools of highly capable staff for a 70% discount. It is, without doubt, the single most powerful tool available to businesses today.”
Offshore staffing and outsourcing are not synonymous. Offshore staffing means recruiting from a worldwide workforce, while outsourcing focuses on contracting for specific services your organization requires, such as accounting or tech support. Companies in the West have outsourced manufacturing to Japan, China and Taiwan, among other nations, for decades. In fact, US-produced merchandise has become increasingly rare. The outsourcing of services hasn’t developed as quickly, though it will eventually move to the forefront as the transition to a digitalized economy progresses.
The future of the labor market lies in a globally sourced workforce. Your company may or may not choose to avail itself of the global workforce, often for reasons of keeping its salaries in its home community, but advances in technology, work trends and globalization have facilitated offshoring so much that it can offer numerous benefits:
- Saving up to 70% on labor costs, giving you the capacity to triple your workforce at no additional cost.
- Managing remote employees as though they were in-house workers.
- Choosing among eight billion prospective employees.
- Hiring for any role or level of expertise.
- Getting assistance with administrative functions, such as compliance.
- Reducing your capital expenditures and offering opportunities to scale your team.
- Improving your operation’s overall efficiency.
- Offering specialist services as well as basic staffing needs, such as call center work.
Due to fear of public backlash, smaller organizations hesitate to embrace outsourcing, which can be a controversial practice.
People have feared outsourcing as far back as the Luddite mutiny of 1779, when mechanized looms began to replace hand looms in England’s textile industry. In fact, few business topics are more controversial than outsourcing and offshoring. In the United States, many critics assert that offshoring takes jobs and earnings away from the country’s residents and communities, yet technology poses a much larger threat to jobs than outsourcing does.
Some opponents of offshoring object to exploiting vulnerable international workers, who earn lower wages than American workers. However, offshoring provides an opportunity for many people in developing nations to raise themselves out of poverty. More detractors feel that offshore providers produce inferior quality goods and services or don’t work productively. However, evidence suggests that offshoring expands the overall job market, and the growth in offshore staffing signals both improved technology and global trade.
“In its simplest form, offshore staffing is really just applying the basic concept of employment – on a global scale. It’s like traditional employment – on steroids.”
The world’s biggest corporations have enjoyed great success with outsourcing since the 1990s. They wouldn’t keep doing it if it didn’t prove productive and profitable. Yet small and medium-sized enterprises (SMEs) remain skeptical and are slow to embrace the practice. Many businesses downplay their use of outsourcing for fear of seeming unpatriotic. Those who successfully outsource hesitate to share news of an advantage that their competitors also could adopt. But employers gain little from contemplating offshoring as a philosophical concept. Often, executives don’t understand the benefits of offshoring until they integrate it into their daily practices.
Contrary to conventional wisdom, offshoring positively influences the US economy.
Offshoring has a negative reputation in most Western nations. Those who oppose it associate it with job loss, meager salaries and “slave labor,” but these criticisms are unjust. Curiously, opposition to outsourcing is more common in economically dominant countries such as the United States, the United Kingdom and Australia. You might assume these countries wouldn’t perceive developing nations as a threat but, instead, would welcome the opportunity to take advantage of “significantly discounted resources” available from other countries.
“Generally, in any economic model, if you can source key resources for significantly less than your competitors, you have a profound advantage.”
Critics of offshoring fear its impact on their domestic job markets. Yet since the 1990s, as outsourcing has undergone explosive growth, unemployment rates have fallen, salaries have increased and economies have strengthened. These positive developments occurred despite a crippling global pandemic. It’s true that the whirlwind technological and social change of recent years has led to suffering for many individuals. But while change always generates both positive and negative impacts, overall employment opportunities and quality of life have improved for the majority of the world’s citizens.
Outsourcing provides notable economic benefits. For example, a US company can save anywhere from 50% to 70% on staffing costs by offshoring to, say, the Phillipines. But don’t go too cheap. It is important to understand the “cost-versus-friction matrix” when offshoring. Many business owners mistakenly believe that offshore staffing is limited to entry-level or minimally trained positions. In fact, you can find employees with the knowledge and expertise to perform any level of work. They just happen to be in a different location.
The way you should structure your outsourcing initiatives depends on your objectives.
Before taking the plunge into outsourcing, you must determine your objectives and work through the ways an offshore team could achieve them. Your priorities might include reducing costs, accelerating growth or investigating new opportunities.
“There are many different objectives in business, and you need the right group of people doing the right kind of things.”
Offshoring offers many possible employee assets:
- “Individual hire” – Say you need an administrative assistant, an accountant or a copywriter. You may ultimately envision a team of specialists, but starting with one recruit is a more prudent path.
- “Support team” – These employees collaborate with members of your current teams. Support teams don’t have independent goals; they aid and abet your existing team. But as they acquire proficiency and familiarity, they might offer specialized support down the road.
- “Break-out team” – You can deploy a group of offshore employees to handle a new project. Perhaps you need salespeople to promote a state-of-the-art product or service. Maybe you want to explore an untapped market. Assembling break-out teams is typically challenging because you aren’t likely to have a cogent blueprint at the start of the process.
- “Independent department” – If you decide to offshore an entire function, such as customer service or human resources, give this department its own structure and chain of command. Designate a liaison to communicate with managers in the home office.
- “Leadership and strategic functions” – Offshoring isn’t limited to entry-level jobs and basic functions. Hiring strategic offshore staff is possible, but it is unlikely that they will be in a position to take your business to the next level, so rein in your expectations.
Businesspeople who are new to outsourcing often have unrealistic expectations. They want talented, seasoned individuals with proven track records, yet they often aren’t willing to pay commensurate salaries – even to people working for lower wages in other countries. Create realistic job descriptions that include role definitions, basic qualifications, your firm’s mission, promotional opportunities and specific parameters, such as pay range, work hours and holidays. Offshoring offers exceptional financial advantages, but penny-pinching can backfire. Instead of trying to hire the cheapest staff, look for quality people who will add value to your business. You will still pay far less than you would pay at home.
Test the waters of outsourcing before you dive into the ocean.
Outsourcing offers multiple structural options. Seek the model that best suits your needs. Outsourcing resembles traditional employment in that you can hire full-time or part-time employees, temp workers, consultants, interns, contractors or advisers. Though you will have a variety of hiring alternatives, starting with a “stable core of dedicated full-timers” is the best option. As you establish your outsourcing policies and learn what works best for you, you can mix and match employees and tasks, depending on your situation.
“The most difficult part of any working relationship is the initial onboarding stage.”
If you’re looking for someone to build a website, for example, find an agency that offers solutions for short-term projects. But if you have long-term ambitions, focus on building a sturdy foundation with one qualified individual. Bear in mind that onboarding is challenging even under ideal conditions. Establish a relationship with your new employees and make sure they understand your requirements and objectives. Hiring multiple outsourced individuals in the early stages of offshoring increases your workload and raises the odds of complications.
If outsourcing impinges on your company’s efficiency or creates large disruptions, it may not be the right option for you.
Saving money is clearly offshoring’s biggest selling point, but companies can’t sacrifice quality, productivity or their culture. Offshoring poses unique challenges. You’ll probably deal with people across different time zones and cultures. Communication can be an obstacle, and you’re unlikely to have the opportunity to meet your remote employees.
“Change is inevitable. The globalization of the workforce is an inescapable reality.”
If outsourcing compromises your company’s efficiency or creates unacceptable disruption, it’s probably not a viable alternative for you. Running a business is demanding under normal circumstance. Outsourcing should relieve your burdens, not add to them.
About the Author
Lifelong entrepreneur Derek Gallimore founded Outsource Accelerator, an outsourcing marketplace and moved to Manila in 2014.
Inside Outsourcing by Derek Gallimore is an insightful exploration of the transformative impact of remote work, offshoring, and global employment in today’s interconnected world. The book provides a comprehensive overview of the outsourcing industry, its historical context, and the various factors that have contributed to its rapid growth. Gallimore expertly analyzes the benefits and challenges associated with outsourcing, shedding light on its implications for individuals, businesses, and economies worldwide.
Inside Outsourcing is a must-read for anyone interested in understanding the far-reaching effects of remote work, offshoring, and global employment. Derek Gallimore’s expertise in the outsourcing industry is evident throughout the book, as he provides a well-researched and balanced perspective on this rapidly evolving phenomenon.
One of the book’s strengths lies in its historical context, which allows readers to grasp the evolution of outsourcing and its current significance. Gallimore delves into the origins of remote work and offshoring, tracing their development from simple labor arbitrage to the complex global network it has become today. By examining the underlying factors that have shaped the industry, such as advancements in technology and changing geopolitical landscapes, the author provides a comprehensive understanding of the forces driving outsourcing’s growth.
Gallimore also discusses the benefits and challenges associated with outsourcing, offering a nuanced analysis of its impact on individuals, businesses, and economies. He highlights how remote work and offshoring have generated new opportunities for skilled professionals around the world, enabling them to access global job markets and earn competitive wages. The author acknowledges that outsourcing can lead to cost savings for businesses, allowing them to focus on their core competencies and achieve greater operational efficiency.
However, the book also addresses the potential downsides of outsourcing, such as job displacement in certain industries and the ethical considerations surrounding labor standards and workers’ rights. Gallimore emphasizes the importance of finding a balance between maximizing the benefits of outsourcing and addressing its potential drawbacks, advocating for responsible practices that prioritize fair employment conditions and social responsibility.
Moreover, Inside Outsourcing explores the broader implications of remote work and offshoring on economies and societies. Gallimore illustrates how outsourcing has influenced economic models, global trade patterns, and the redistribution of wealth. He argues that understanding the complexities of outsourcing is crucial for policymakers and business leaders to navigate this new landscape effectively.
The book is written in a clear and accessible style, making it suitable for both industry professionals and general readers. Gallimore’s expertise and passion shine through the pages, providing readers with a comprehensive and objective view of outsourcing. The inclusion of real-life case studies, anecdotes, and interviews further enriches the narrative, showcasing practical examples and adding a human touch to the topic.
In conclusion, Inside Outsourcing by Derek Gallimore is an insightful and thought-provoking examination of the transformative power of remote work, offshoring, and global employment. The book offers a balanced perspective on the benefits and challenges associated with outsourcing, emphasizing the importance of responsible practices and ethical considerations. By shedding light on the complex dynamics of the outsourcing industry, Gallimore contributes to a better understanding of its impact on individuals, businesses, and economies worldwide. This book is an essential resource for anyone interested in the future of work and its global implications.