What Is Outsourcing In Economics?

Outsourcing In Economics


Outsourcing in economics is when a business, large or small, uses an outsourcing company to perform a service typically carried out by in-house employees.

When a company outsources specific tasks to a third-party company, it is usually done to cut labour costs and gain efficiencies.

Small businesses and large corporations are realising that using outsourcing providers allows them more time to dedicate to the core competencies of their company while also helping with cost-efficiency.

Using outsourcing services can help reduce costs and business expenses but shouldn’t mean the quality of service you provide to your customers is reduced. On the contrary, using the correct external service provider should enhance your service quality.

An Introduction To Economic Outsourcing

Business process outsourcing is not a new concept, as it dates back to the 1880s when the textile mills of New England transferred manufacturing to the Carolinas.

It was not termed business outsourcing then, but the business practice was the same then as it is in today’s modern business world.

Businesses have been hiring an outside company such as an accounting firm to deal with their financial accounts for years.

The same can be said for companies providing manufacturing jobs. This sector is not new to using an outsourced provider to help them produce elements of their product during the production process.

It is only during the past few decades that we have seen a real boom in domestic outsourcing and outsourcing abroad on a global scale.

Due to the cost savings benefits to companies, it is becoming an essential part of everyday business functions and a key element of its overall business strategy.

Many companies decide to outsource to developing countries thanks to the lower costs to their business. It also provides job security for people in other countries where employment isn’t very high.

Examples Of Outsourcing

Call Centres

Many companies use a service provider for their business call centres. Companies outsource what used to be their domestic jobs, such as a phone operator at their call centre, to a foreign company in the Philippines or India to save on operating costs.

Call centres have played a vital role in the outsourcing strategy of my companies around the globe.

The benefits outweigh the negatives when a company hires a remote worker in a foreign country to deal with the company’s core operations.

It can help the business owner save money on office space and sick and holiday pay that you need to consider when hiring your own employees who work in-house.

Call centres often employ a large section of workers in many countries worldwide. But even small businesses with a limited budget can hire a team of VAs to deal with incoming and outgoing calls.

However, the remote worker may be required to have specialised skills in specific tasks which relate to the sector your business is in.

Information Technology

When it comes to the information technology side of the business, many owners prefer to use the outsourcing process for technical support.

Employing people with specialised skills in IT is seen as one of the most essential functions of a small business.

Companies see the advantages of outsourcing IT duties such as computer programming to skilled workers in developing nations. These remote workers in countries like India can perform tasks related to IT to a very high standard.

Some people still oppose outsourcing IT work to other countries, but they fail to realise that apart from being cost-effective, it also helps people in many countries around the world have a secure income.


Manufacturing companies have been outsourcing to outside companies for years before the term outsourcing was commonly used.

Developed countries have been outsourcing their manufactured goods to lesser developed countries for at least a century as part of their business processes. Free trade between American companies and others worldwide has helped to forge strong relationships built on trust and respect.

One of the central core competencies in any business is producing consistently high levels of service or products.

The manufacturing industry understands this better than most due to the high level of competition within the sector. In addition, consumer demand is high in this industry, so a high level of production and service is vital.

Administrative Tasks

Hiring a virtual assistant to perform the administrative tasks that every company finds time consuming will see your business function better. When hiring a remote worker, they will be self-employed and contracted to set work hours.

The VA will often come from a foreign country like the Philippines or India. These countries have been providing remote workers to countries worldwide for years and are seen as the best in their field.

The tasks you hire them to carry out are often inputting data, making phone calls, and managing email inboxes. These tasks are time-consuming and usually the ones that business owners hate doing – but they must be done.

Outsourcing these duties to a remote worker will mean fewer full-time employee benefits, but they provide services you have contracted them to.

Executive Assistant Tasks

Companies all over the globe are hiring executive virtual assistants to carry out several high-level tasks.

The executive administrative tasks and duties will be arranged and agreed upon.

These duties can range from setting management schedules and appointments, making travel arrangements, dealing with marketing campaigns, and managing social media content.

Employing a remote worker to do administrative assistant tasks should be a vital business function.

Our company has vast experience in helping with outsourcing, training, and hiring highly skilled virtual assistants from the Philippines. In addition, we can help you develop a solid contractual relationship with us when hiring a VA.




How Does Outsourcing Affect Economies?

Effects On The Receiving End

Most countries in Asia rely heavily on the outsourcing industry. Countries like the Philippines, China, and India provide the most outsourced workers to the rest of the world.

The economy in these developing countries has seen a boom thanks mainly to providing outsourced services to countries like Australia, the US, Canada, and the UK.

The increased employment levels in these Asian countries help with the overall standard of living in these parts of the world.

An increase in wages and spending power has provided a welcomed boost to their economic growth over the past decade.

The millions of jobs created by outsourcing across all different business sectors have ensured that countries like India, China, and the Philippines have grown and will continue to develop and grow in the years ahead.

Effects On The Source Country

Many countries such as Australia, the UK, and the US are fearful that many of their IT, customer support, and administrative jobs will continue to be outsourced to Asian countries and developing economies like India and the Philippines.

These countries can provide workers at a cheaper rate of pay due to having a lower standard of living, and this makes it attractive for companies based in the US, for example, because they can make more profits.

However, workers in the US are fearful that their jobs will be axed, which will lead to an increase in unemployment.

This is an understandable fear which has sadly become a reality for some. Still, as is often the case, people in charge of organisations worldwide tend to concentrate on the essential thing – profits.

Some people will see a company’s profits increasing and think there is no need for them to reduce costs, but in the broader sense, businesses exist to provide a product or service and make money.

There is little doubt that outsourcing has advantages and disadvantages. It depends on which side of the fence you are looking at it from.

The hope is that outsourcing won’t lead to an economic recession in the US and other countries like the UK, Australia and Canada.

It’s likely that these countries will withstand the hit and develop different business opportunities within untapped industries that can help both them and countries that provide remote workers.

Find Out More About Outsourcing Opportunities

What companies around the world are beginning to understand is that outsourcing is here to stay. The benefits outsourced workers provide to businesses far outweigh the negatives.

What business owner would not want to cut costs and still maintain the same level of service?

If you want to take the first steps towards outsourcing some time consuming tasks but hiring a VA is new to you, then contact our team today for a free consultation.

We’ll be able to take care of the hiring, training, and management of your VAs, and there are good chances that we have available team members in our talent pool ready to take on some of these tasks.

Contact us today to find out how quickly you could be up and running with a dedicated VA to free up your time.

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