Outsourcing has been a hot topic for years. Some think outsourcing is over hyped and will never affect their job or industry. In reality, with technology increases and company’s profit margins being squeezed, there may be more incentive than ever before for companies to see how outsourcing can help them save money.
To illustrate this point I will use an example of a job that will get outsourced more in the future: Accountants
Just a quick note: I am an accountant and I have seen outsourcing firsthand. The cost-savings have potential to be very high over the long-term, and technology is making it much easier to leverage workers overseas.
Just look at this comparison of salaries:
CPA Accountant in the United States average salary: $40,241 – $91,518
CPA Accountant equivalent in India average salary: Rs 241,610 – Rs 1,827,659 or $4,569 – $34,562
If a company can outsource accounting duties on a wide scale, they can literally save millions of dollars a year. What company wouldn’t take advantage of that?
While we have already seen a lot of factory jobs outsourced overseas throughout the past few decades, office jobs will increasingly be moved.
There are many jobs that can be outsourced abroad and the disparity in wages between the United States and abroad can be seen firsthand on oDesk.com. There are people who charge $10/hour in Pakistan to do spreadsheet/database work (and I’m not talking data entry) that their equivalents in the United States charge between $50-$150/hour. Just look at the results for a search on vba (which stands for visual basic for applications) on oDesk. There is no way you would find someone freelancing for less than $50/month in the United States, yet on oDesk there are many overseas charging far less than that amount.
There are many jobs that are very unlikely (or impossible) to outsource
- Trade jobs like plumbers, electricians, and bricklayers are always going to be needed. These jobs aren’t done remotely and in some cases would be impossible to outsource.
- Doctors, dentists, and psychologists also come to mind as jobs that are unlikely/not practical to outsource.
- Finally, jobs that require detailed analytic skills and core business functions, such as jobs that contribute to business strategy, are the most likely office jobs to stay in place.
The reality is, outsourcing is alive and well. The faster technology develops, the easier it will be for companies to take advantage of skilled workers living in areas of the world that have a lower cost of living than the United States and other developed countries. There are many companies that are making it even easier for businesses of all sizes to take advantage of outsourcing.
Have you seen outsourcing at your workplace? Do you agree that outsourcing will only increase in the future?
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Photo by Mark Hillary
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I agree that it will only increase. I don’t think it will ever happen at my workplace though. In my industry, it’s a requirement (by law) that you visit the place that you are engaging in so that wouldn’t work too well if the analyst was overseas. There is a lot of direct client interaction as well.
@SenseofCents Laws can change ;) There was a similar SOX requirement that literally required signed copies of journal entries. The law was phased out and is no longer a requirement.
But anyway please ignore my pessimism, it sounds like your workplace fits in the “impractical/impossible” bucket and outsourcing won’t hit you.
I completely agree that it will only increase. As the poor rate climate puts a squeeze on profits, companies I think will be looking for different ways to save money and cut costs. I experienced it at my last company about two years ago. They outsourced 200-300 backoffice type processing jobs overseas in order to save money. The interesting thing is that often times the work would end up being processed incorrectly and would require to be fixed in the home office, so I wonder what cost savings was actually realized. I also wonder if and how much of this is felt by other firms that outsource.
@FrugalRules Yes it seems like a lot of companies have trouble initially outsourcing. It’s definitely a net loss at the beginning, and potentially forever until the company abandons outsourcing. Unfortunately for American workers, I see increases in technology and education globally as making it much easier to outsource…and having the job done correctly when it is outsourced.
Good points!
I guess I am thankful that I work in an industry that cannot be outsourced!
@Holly at ClubThrifty Good for you!
I think the big companies will see increases in outsourced jobs. They are all about the bottom line, and if there is no tax incentive to keep work here, that’s not going away. Don’t forget the small businesses though. The doctors, dentists, bricklayers, plumbers, laundromats, ranchers, etc.All need good accountants. We have no idea how to do taxes, payroll, schedule K’s, and quarterly reports most of the time. We were lucky enough to find an honest employee to train for some of that stuff, but used to spend about $3K a year on accounting. Now it’s down to around $1000 per year. Get 100 clients and there you go. There will always be jobs for those who are smart and proactive. We just might have to think outside the box.
@Eyesonthedollar Very true! I’m amazed you got it down to $1k/year. I can’t imagine keeping the books for 100 companies, sounds like a 100 hour work week!
You bring up a good point that it’s good to think outside the box.
@DC @ Young Adult Money
You’d do the networking and hire people to do the nit picky stuff. Think like the Donald!
At the end of the day it all comes down to profit. If the same work can be done in a developing country for a lot less then that is where the work is going to go.
@OneSmartDollar And that’s exactly what is unfolding…and I see it unfolding at a much more rapid pace in the future.
I know we sent some tax returns to an outsourced accounting place at one of the CPA firms I worked for. Be at the top of your field knowledge wise and there is a smaller chance you’ll get outsourced.
It is hard to argue with the raw numbers.. But there is, of course, a downside to outsourcing as well. The quality of work tends to decrease a bit, because the overseas workers really don’t have any skin in the game. Many times they don’t know or care who they are actually working for, so the success of that company is not a consideration in their work.
In my field, IT, outsourcing of development (computer programming) is commonplace, but problematic. Many companies have actually scaled back their outsourcing models from the early 2000’s because of the inherent issues.
nice information. thank you for sharing it.
thanks
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