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  • Is outsourcing riskier?

    Is outsourcing riskier than producing domestically? I mean, you have to deal with a whole new set of laws and regulatory issues. You might also encounter a lot of corruption. What are your experience regarding this issue?

  • #2
    Re: Is outsourcing riskier?

    Do you mean to say outsourcing from abroad? Well, a cousin has been outsourcing their footwear products from Chinese factories. He said that China has very lax regulations and seems to be very accommodating to foreign companies. The reason for the outsourcing was when their local factory was hit by a labor strike. The owner got fed up and closed the factory. Now it is more convenient to outsource to China than having their own local factory.

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    • #3
      Re: Is outsourcing riskier?

      I don't think it's that much riskier as long as it's theoretically more beneficial for the business to go that route. Even if it takes a lot more effort to set up a new system in a foreign place, it might be even riskier to stay put and garner less profits. I think all places have their advantages and disadvantages and the best leaders always have a good way of measuring which one would yield the most benefits while acquiring the least disadvantages.

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      • #4
        Re: Is outsourcing riskier?

        Persevering in what the locals can offer is not a good idea. Businessmen are innovators and for a business to prosper, it should look for other means that are better and more profitable in terms of supply and demand. Sometimes outsourcing from other countries appear to be a tedious task particularly with the establishment of a branch office but in the long run, the profit derived from that branch is worth the trouble. A simple software house that my husband used to work with was organized by a Japanese as a branch of their software house in Japan. And they earn a lot from it.

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        • #5
          Re: Is outsourcing riskier?

          Don't forget there is a difference between outsourcing and offshoring.
          Outsourcing just means you hire someone else to take care of certain business aspects, hiring an accounting or auditing firm is an example of outsourcing.
          Offshoring is moving production to another country to take advantage of favorite conditions there (I.E cheap labour)

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          • #6
            Re: Is outsourcing riskier?

            Here we have the BPOs - business process outsourcing - which is hiring a firm for the required manpower. The forerunner of the BPOs are the so called labor agencies that are prevalent with maintenance people, those are the janitors, messengers and other laborers who can do the dirty work in the office. Until now those agencies are still in existence but they are called labor agencies. With BPOs, they are mostly the call center agents provided by local companies in cooperation with foreign principals.

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            • #7
              Re: Is outsourcing riskier?

              Originally posted by Corzhens View Post
              Here we have the BPOs - business process outsourcing - which is hiring a firm for the required manpower. The forerunner of the BPOs are the so called labor agencies that are prevalent with maintenance people, those are the janitors, messengers and other laborers who can do the dirty work in the office. Until now those agencies are still in existence but they are called labor agencies. With BPOs, they are mostly the call center agents provided by local companies in cooperation with foreign principals.
              Funny enough the biggest Canadian BPO is just called "manpower."

              Did you ever heard how the USA used to use India for a lot of it's call centers?
              I am sure they still do, but a lot have switched to Canadian call centers, our dollar makes it a little cheaper and Americans seem to like it better.
              I have to say, it's because a lot of them are just plain racist. It's just how it is in a lot of the USA, I have personally heard the phase "get someone who can speak English" when they person can, they just have an accent.

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              • #8
                Re: Is outsourcing riskier?

                A lot of outsourcers have an idea in mind about the best locations for outsourcing, so if there are any regulatory or law issues then it's probably not worth outsourcing in that area. A lot of the big countries like China or India have outsourcing accomodation.

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                • #9
                  Re: Is outsourcing riskier?

                  The Philippines have a pro-labor law that's why I am surprised with the proliferation of BPOs, the business process outsourcing. Workers and employees here are allowed to go on a strike and not a few big companies were victims to that trick by labor unions. But in fairness to the labor unions, I haven't seen a strike yet in any of the foreign BPO particularly the call centers. Maybe they understand that foreigner are easy to scare with those labor tricks and they are careful in their moves.

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                  • #10
                    Re: Is outsourcing riskier?

                    I do not think outsourcing is riskier than any other business out there. Regardless of the venture you have in mind, the risks will always be there. It's a matter of implementation, the amount of trust between you and your business partner and luck. Meaning, other factors beyond your control are cooperating as well (i.e. weather, the absense of natural calamities, etc.).

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                    • #11
                      Re: Is outsourcing riskier?

                      Originally posted by Fuzyon View Post
                      A lot of outsourcers have an idea in mind about the best locations for outsourcing, so if there are any regulatory or law issues then it's probably not worth outsourcing in that area. A lot of the big countries like China or India have outsourcing accomodation.
                      Agreed. I think some countries who specialize in outsourcing will most likely make themselves more and more accessible to those who wish to try it out so the risk probably is lessened exponentially once that niche is found by the country and the government does something to back it up. Because of this most of the risk tends to be eliminated after a few years of molding the regulations and systems.

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                      • #12
                        Re: Is outsourcing riskier?

                        I'd say it's only risky in the beginning when you don't know how to find people that can easily do the job effectively. You really gotta know how to find the right people...sometimes theyre cheaper than the ones that say theyre amazing, it's all about individual ability and not really the outsourcing process itself.

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                        • #13
                          Re: Is outsourcing riskier?

                          There will always be risks associated with outsourcing. The number one reason why businesses outsource is that it can be much cheaper. But if you decide to outsource, you have to be willing to take risks. For instance, the services of the offshore company you hire may not be up to par with what you expect. In a nutshell, outsourcing overseas is similar to gambling. There's a lot of luck involved.

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                          • #14
                            Re: Is outsourcing riskier?

                            Basically when it comes to outsourcing, the question is do you trust somebody else to do something instead of doing it yourself, so a lot will come down to how much you trust the other company you employ to do the work for you. If parts of your trade you can't do yourself, then you obviously have no choice but to outsource so you have to make sure that your using a reputable company, but in an ideal world, if possible, I prefer to do everything in-house because at least then you know that the work will be done to the standards that you set. Trusting another company to do part of a process to the same high standards you have is often hit and miss, and it can cause more problems than what it solves.

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                            • #15
                              Re: Is outsourcing riskier?

                              I would not say it is riskier, at least not categorically as it can depend on the industry being talked about and the nature of their business. I will say that it carries a different set of risks. What needs to be done is an honest assessment of the in-house risks, don't just assume it's safer. After that assess the risks of outsourcing and compare notes. You may be surprised

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