Monday, 20 February 2012

Busting Myths about Offshoring

Outsourcing costs jobs?
In everyday conversation a myth is fiction – something that is furthest from the truth and feeds on a mix of rumour and a torpid mind. A myth can easily turn into a cultural phenomenon: once it takes hold, it can be hard to uproot from the psyche. There are many a triumphing myths that have, like myths usually do, been successful in rooting themselves to the entrepreneurial minds of many. The Offshoring industry has not been spared of its share. Today lets debunk a few Offshoring myths.

Myth#1 - Offshoring costs jobs

Since the recession raised its horns people took to thinking that outsourcing was turning people up at dole queues. They said, ‘Outsourcing creates fear as jobs go overseas; it causes unemployment”. Yes, the numbers are startling, but the effect of removing redundant jobs creates room for growth. Let me explain this: I have observed, over a long-run, the business growth from outsourcing provides an impetus for more jobs i.e. cost savings from outsourcing have a torpedo effect – the money saved can be used to create new business opportunities which in turn create more jobs.

Contrary to popular belief outsourcing actually creates jobs. An independent research says that more than a million jobs are lost to outsourcing each decade. The same research also says that in the last 5 years the government has been able to create 10 million jobs. Without denying the unemployment case, I would like to say outsourcing only removes the job which has become uneconomic to carry out.

Myth#2 – Offshoring is not good for the local economy

Myth #2 finds its roots in Myth #1. It is as misunderstood as it is interesting. Sometime back the McKinsey Global Institute undertook a study and concluded that for every pound that is spent on a process outsourced to India, a pound and a half is saved. It went as far as to say that outsourcing even returns to the Economy as earnings.

Far from being a losing game, outsourcing creates a mutual economic benefit. Take this for example – many offshoring firms which specialize in UK outsourcing are owned in whole or in part by British businesspeople, like QX Limited is, and repatriate a part of the profit back to the UK economy.

Myth#3 – Cultural Disparity

This myth has a lot of credence to it.  However, it is not a coincidence that over 30% of the 1000 Fortune companies outsourcing chose India as their destination. Due to a superior education system, Indians tend to have excellent English language skills.

I have seen first-hand that westerners tend to be more autonomous, are keen on using a narrow-angle lens to view things in isolation while aiming to achieve short-term objectives quickly, whereas, people in India have a holistic approach and using a wide-angle lens work collectively to achieve long-term objectives. The Indian approach is cleverly fitted for analytic and commodity tasks such as payroll and accounts. I won’t take away anything from the Western approach as I find it very competitive and think, if used justly, can be employed to grow a business. When these separating factors come together they help bridge the gap between growth and stagnancy. These cultural differences in many cases work to everyone’s advantage.  


Outsourcing the supporting functions that are not part of the core competencies of your business is the road to travel. If you resist change right now you will have to grin and bear the consequences later. “If companies don’t move work offshore, they will become less competitive. This cripples the economy and threatens the loss of more jobs than Offshoring does”, concludes a prominent economist in her column on The Independent. Sounds like the winners will be the ones who can take the right street at this critical juncture.

Want to bust a myth? Please leave comments.

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