Developed economies are more likely to outsource because they benefit from cheaper labor from developing economies. In addition, developing economies generally are good providers of raw materials. Another reason is that demand exceeds the capacity to supply and the access to advanced technologies.
It’s time we recognize the economic benefits of sourcing labor from other countries. For example, we have mentioned in previous blogs that Argentina’s software developers are highly regarded the world over for their expertise. When outsourcing, savvy business leaders prefer to hire developers from countries such as Argentina on account of their high quality of work.
Outsourcing and professional competition
Outsourcing reduces barriers to market entry and increases competition. The increase in competition is promoted by the open market generally benefiting consumers. Outsourcing enables companies to enter into new industries for which acquiring a labor force would have been very costly or impossible in the past.
Benefits of outsourcing services.
We know that outsourcing offers many benefits. These benefits provide positive results to a company, for instance: outsourcing can potentially increase company profits.
A business often outsources the production of goods and services to reduce costs and increase company profits. Companies may outsource and/or offshore from countries with lower labor costs. They may also outsource to cut down on training and hiring costs of local employees, or to expand their business base.
Another spinoff from outsourcing is that it can increase economic efficiency. Companies outsource to reduce the costs of their products or services. Proponents of outsourcing say it can also increase the overall efficiency of an economy by distributing tasks among different skilled populations, thus ensuring better production distribution.
Another benefit of outsourcing is that it can help relocate jobs from developed to developing nations. Some argue that outsourcing (offshoring) is behind the loss of local jobs; benefiting other nations by offsetting the production costs from richer countries like the United States to less developed regions.
Domestic workforce vs offshoring
Both a domestic workforce and offshores have their distinct pros and cons, we will discuss these below.
Mainly, your domestic workforce is usually sourced from a limited talent pool (based on your local community). When offshoring you can choose from a vast pool of professionals from around the world. However, some believe that it’s more difficult to retain domestic workers than remote workers. Moreover, we also know that by offshoring we can up our requirements since we have a bigger choice of workers and skills available.
Outsourcing has a positive impact in LatAm as developed economies offshore their less sophisticated tasks to its developing countries aiding to their progress. Outsourcing has allowed many Latin Americans to work for foreign companies, providing them with experience and a broader range of job opportunities. It has also helped to grow these smaller economies, making them alltogether more competitive.
Offshoring trends in developed countries.
Offshoring became a trend during the pandemic with the spread of remote working modalities. The pandemic accelerated the advancement of technology in an extraordinary way, as workers had no choice but to adapt to working from home.
As it turns out, employees increased their productivity by working away from the office. Offshoring took a big leap as companies were forced to hire distant workers, many from foreign countries. This new trend brought together talents from many shores who proved to be more productive working remotely.
What services do developed countries outsource the most
The most outsourced services today are in the areas, of logistic services, auxiliary services to the industry and everything to-do with IT services. In second place we have the Commercial Arena, with commercial teams, promotions and telemarketing. According to a study by Adecco, 44.70% of all companies in the land have outsourced these services.
