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Reason why companies outsource work: Various causes of outsourcing.

BY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-12-11

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   David Prakash Kumar
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Outsourcing has been on the rise in the past decade. This has caused certain countries to benefit and the people of other countries have suffered. One needs to understand what outsourcing is before one is able to know the benefits and drawbacks of outsourcing. This article lists the various causes of outsourcing.

Outsourcing is the process in which one company or organization lets people from other organizations or even individuals to do the work. There are many reasons for this being done. These are the various causes of outsourcing.

1. Decreased profits:

When a company has decreased profits, the company may outsource certain specific jobs to other companies. This helps to decrease the cost in production or doing a particular job in the organization. If the company continued to do the work, they would have to have more employees on a regular payroll. This on the long run will work out to be very costly for the company. When the work has been outsourced, there is decreased need for the regular full time employees. Instead, part time contract workers do the work and the cost of paying them is less.

2. Cheap manpower:

Another important cause of outsourcing is the fact that cheap labor or manpower is available in various developing countries. These countries have the people who have great skills and knowledge, but they are unable to excel due to various reasons including the poor economy in their country. These people and countries are exploited by the people in the developed nations so that the work gets done, but the profit goes to the developed country. Though this cause is an advantage to the company outsourcing the job, it helps the people of the country where the job was outsourced by providing job opportunities and also improving the economy of these countries.

3. Exchange rates:

The currency value is different in various countries. This is one of the major reasons for the outsourcing. A country where the currency value is very less will have the people earning a lot with these outsourced jobs. The country or the company that is outsourcing the job will also be spending less because of the decreased value of the currency in the country where the work has been outsourced.

4. Other reasons:

There are other reasons too for various companies trying to outsource their jobs. These include the increased cost of land and infrastructure in the developed country. The company benefits from the decreased cost of machinery, buildings and other things in the country that is still developing.

These are some of the most important causes for the outsourcing of the jobs to the developing nations. In this scenario everyone benefits except the people of the country from where the job has been outsourced. This is because these people will have decreased jobs, while the companies in their country benefit by increasing their profits. Outsourcing jobs have become a way of life, but has been curbed to an extent after the recession by certain countries to protect the jobs of people in their own country.

Article Source: http://www.saching.com

About Author / Additional Info: I am a physiotherapist and also a freelance writer. I have been writing for many blogs and websites and also take up freelance assignments. Comments are welcome at prakashdavid@rediffmail.com

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