What’s Outsourcing?

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The latest buzzword in today’s global economy is Outsourcing. To thousands of companies worldwide, it sounds good, while many people don’t find it that good. So what is this strategy that stole the spotlight in global industries and supposedly the jobs of American workers?

Outsourcing is a business practice empowered by digitalization and technology that allows a company to expand its boundaries while concentrating on core functions. It’s a win-win solution as companies deliver services to other nearshore or offshore parties. As claimed by its name, this practice relies on the concept of a company that uses external resources to perform tasks that can be handled by internal resources.
Why does a company choose to delegate specific business functions to an external company if it can do it by itself, thus avoid several troublesome consequences?

Early examples of Outsourcing

Let’s go back in time to the Roman Empire. Have you ever heard about Cura Annonae? It was a strategy to keeping the peace by distributing free grain to the poor population of ancient Rome or more specifically to every male above the age of 14. The city of Rome grew at a fast pace, just like the Roman Empire, thus increased the need for housing and food. Therefore, the Roman rulers decided to import grain from Sardinia, Sicily, and Egypt.

It was more convenient to import grain than to grow it on land that could be used for other purposes. Historian Josephus used to say that northern Africa fed Rome for eight months of the year and Egypt only for four. In order to guarantee the quality of grain over 6,000 colonists were settled in Carthage during the first century BC and each of them received 25 hectares of land for growing grain that would be shipped to Rome.

This is one of the first examples of outsourcing. Peacekeeping and urban development were core values in the city of Rome. Food supply was important too, but why not delegate it another part of the Empire instead of wasting time and land on growing gain?

Reasons why to outsource

Although ancient, this is the logic that many agile companies use nowadays and the reasons why they do it are simple.

Cost reduction and flexibility
This is the first reason listed when speaking about the advantages of outsourcing. Hiring people locally is always more expensive than in lower-cost labor markets that offer a large talent pool and skilled employees. One enterprise can’t afford to create a completely new team for a specific process that in many cases is going to be temporary. It will take time to find, hire and train them. On the other hand, outsourcing is a contractual relationship.

New perspectives
Other companies from different countries may have a lot of experience and different point of views when it comes to specific tasks or business services. At the same time, they don’t feel any obstacle that takes them back from sharing an honest opinion that’s different from what the executives of a given company tend to believe.

Access to more talent
Companies and especially those based in countries where talent storage is turning into a main concern due to the aging population or low birth rates gain access to global talent pool easily.

Access to new markets
While outsourcing a company has the opportunity to explore new markets.

Reduced turnover rate
A high rate of employee turnover can really hurt a company. People that are trained and reach a level of expertise can look to improve their career prospects, higher wages, or new professional challenges. In the meantime, there’s always a high demand for experts, and employees are always tempted by good offers. Outsourcing may help to reduce the impact of a high turnover rate.

Emerging Outsourcing Destinations
In a few words, outsourcing offers the same benefits to long-established companies and to new startups. It’s impossible to do everything by yourself as it gets time and resource consuming.

Around the Balkans there a saying that goes like: It’s impossible to carry two pumpkins under one’s arm. In the meantime, the Balkan countries are an emerging destination for outsourcing. The companies that have already outsourced to a Balkan country staring 2015 cut their costs by over 50 Percent.

Differently, from the other countries of the Balkans, Albania is the only country in the region that has not been involved in conflicts. Thus it is a safe and politically stable and a potential EU candidate member. Albania’s economy is focussed on tourism, agriculture, ICT, renewable energy (among the few countries in the world that relies 100% on green energy), manufacturing and mining, transports and logistics. Thanks to its strategic location, economic incentives, the relatively young, skilled, well-educated, and multilingual population, and a cheap labor market, Albania is turning into an emerging outsourcing destination for nearshore and offshore companies.