The Downside of Outsourcing IT Labour Overseas
In the perpetual search to cut costs, businesses often decide to outsource work to a foreign country with dramatically cheaper salary expectations. This can be particularly rampant in the IT field where the average annual salary for a USA-based software developer is $86,000 versus the annual salaries for software developers in the top two IT outsourcing countries of India ($7,000) or Ukraine ($1,000). This practice of looking beyond your borders for employees is sometimes referred to as “offshoring”. Offshoring or outsourcing deals with relocating either production or services to a country outside of a company’s home location, such as manufacturing, customer service, or IT services. The most well-known examples are clothing manufacturing outsourced to Bangladesh, electronic manufacturing outsourced to China, and IT/customer service representatives outsourced to India.
This practice can certainly open your business up to a wider talent pool since you’re no longer reliant on local specialists within your city, province/state, or country. It also allows for diversification of the culture, perspectives, and people within your organization. The larger number of different voices in your business, the better (and more well-rounded) your decisions can be. However, those pros can (and often are) outweighed by the cons inherent within outsourcing.
Drop in Quality
As with everything in life, you get what you pay for. Opting for vastly cheaper salaries means that while the foreign software or IT employees you choose may be skilled, their education, work experience, and technical skills may not be on par with those of the professionals in your own country. This is especially true when the business in question is situated in the developed world (the USA, Canada, the UK, et al), and is engaged in offshoring to look for (and exploit) cheaper labour in the developing world.
A Hit to Company Culture
Outsourcing doesn’t just affect a company’s budget; it can also affect a company’s domestic workforce. Often, the instant a business opts for outsourcing in some area of their organization, there becomes a very real fear on behalf of domestic employees that their jobs will be next. Whether true or not, the perception that it’s only a matter of time before they, too, are replaced by cheaper foreign labour can lead to a whole host of domestic issues, including decreased employee retention, lower productivity levels, and overall employee resentment.
A company’s culture can also be affected by clashes between the fundamental differences that can pop up when trying to intermingle employees with radically different cultures. While stereotypes from a place of ill will are unhelpful and harmful, and every single person on earth is a wholly unique individual, culture and language can often influence people in a whole host of ways, both obvious and subtle. For instance, culture can dictate whether you generally tend to act more outspoken, polite, friendly, or reserved in a professional setting: think the loud, boisterous, individualistic American worker versus the more group-focused, reserved, hierarchy-aware Japanese worker. It can also affect whether you tend to be late for meetings, whether you answer your phone during discussions, whether small talk is acceptable, and whether there’s an order to who can speak during meetings. Some cultures may find tardiness, ringing phones, prolonged silences, and speaking after a superior completely acceptable and expected, others may see them as rude and insulting, while yet others may prefer a mix of both. This fundamental difference in professional etiquette can easily (and often does) result in culture clashes. Interestingly, even greetings can cause headaches. I’ve often heard non-native English speakers express confusion or annoyance at the common Western trend of asking someone “how are you?” in passing, without the intention of stopping to hear the answer. These differences can be smoothed over, but to do so seamlessly involves a lot of extra time and energy (and money) on a company’s behalf by way of cultural training or mediation and can sometimes be more of a headache than it’s worth to save money on hiring cheaper labour.
Shaky Company Reputation
There is an inherent element of exploitation when companies begin opting for outsourcing their workforce; particularly their IT departments. Public perception often labels a company that uses outsourcing as trying to undercut the local economy; giving a job away to someone on the other side of the world for much cheaper, instead of hiring someone within the community who may have needed that job to survive. Working conditions can also be incredibly unequal between domestic and foreign factions. The dichotomy between a collapsing factory in Bangladesh (which killed more than 1,000 workers) and hip, trendy American offices where employees can drink fancy coffee and unwind with an air hockey table, is stark. Therefore, as the world progresses, more and more customers are paying attention to companies and how they treat their workers, both domestic and foreign. People want to consume ethically, for as much as that’s possible, which means they’re increasingly making the conscious choice to give their money to ethical businesses. The younger generations are leading the charge, with 73% of millennials willing to spend more money on sustainable, ethical products. People are no longer simply buying a product; they’re buying an extension of their moral convictions. This means, if your business is engaging in outsourcing all or part of your workforce, you’re increasingly removing yourself from the sales earning potential of almost an entire generation.
Your company’s reputation can also find itself on shaky ground if your outsourced force has any direct interaction with your client base, as a subpar client-customer interaction can damage your company’s reputation. If you’ve ever had a poor interaction with a company’s outsourced IT department (or customer service department), what thoughts often come to mind? That the contractor the company outsourced an important part of their business to is frustrating, but the company itself is good and helpful? No. Unfortunately, you’re more likely to think that the company, itself, is bad, frustrating, or unwilling to help you. Simply put, the outsourced workforce becomes the company’s workforce, and their reputation becomes the company’s own. An organization may be able to compartmentalize “us” (domestic) vs “them” (foreign) employees, but customers largely don’t.
On a purely practical level, outsourcing part of your workforce can also mean dealing with radical time zone issues. Many companies already struggle with the relatively smaller time zone differences within their own country (think the 4-hour difference between Vancouver and Halifax, or the 3-hour difference between Los Angeles and New York City). Imagine the frustration that can multiply considerably when you’re dealing with a time difference that can easily exceed 9 hours. This means software (or other) issues that may pop up on one side of the globe can go unanswered or unresolved for an entire workday, simply because it may be the middle of the night for a company’s outsourced IT team. This can be catastrophic if the issues include website crashes, software glitches, or any other issue that can grind productivity or consumer access to a halt.
Communication issues can also extend to language, itself. While English is the current lingua fanca, or universal language, not every foreign employee will have the same grasp or depth of knowledge of the language as an employee in a company’s (English-speaking) home country. There can also be stark differences in the kind of English taught, including the inclusion of vastly different idioms or slang terms (UK vs American English vs Canadian English) that can widen that chasm between the domestic and foreign workforce. Misunderstandings and miscommunication can be a very real problem that can slow down productivity, raise employee ire, result in delivery errors, and otherwise put a company with outsourced labour at a disadvantage.
While there are some benefits to outsourcing labour to foreign countries, especially in the IT space, the negatives can greatly impact a company’s profitability, reputation, quality, and culture. Often, the monetary benefits may fall short of what a company could have gained had they kept their workforce local.
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