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Where Do You Go from Here? Evaluating the Risks of Outsourcing in a Trump Presidency

March 13, 2017 Claire Ponsaran No comments exist
Where Do You Go from Here? Evaluating the Risks of Outsourcing in a Trump Presidency

Anti-outsourcing rhetoric defined Trump’s presidential campaign last year. It’s still the butt of his righteous anger, but his promise of “punishment” has turned into positive reinforcement. One of his moves to prevent companies from moving their manufacturing operations to another country is to offer tax breaks.

It’s not so bad now doing business in a Trump administration, is it? If you’re thinking about outsourcing, what can you do to make it work for you without putting your business at a disadvantage?

#1: Outsourcing part of your operations is okay. It’s your prerogative as a business entity to lower the costs of your production.

As a corporation, it’s not your responsibility to create jobs. If it were, then companies didn’t need to automate those routine non-cognitive tasks using machines. They would have made sure the work was done only by human beings. As a business, your objectives are to reduce costs and increase your profits. One way of doing that is through offshore outsourcing.

Even if Trump was successful in imposing a 35% tariff on imports (which is highly doubtful), the price difference would be passed on to the American consumer, effectively raising the retail prices of these goods.

Professor Mitchell Kane, an international tax law expert from NYU School of Law, explained it clearly to The Washington Post:

If we write rules to channel companies into higher cost structures, this will ultimately show up in consumer prices. That’s true regardless of whether Mexico rebates its VAT upon export of goods. When companies move production offshore it lowers their cost structure. Those cost savings will be passed along to consumers back in the United States eventually.

It’s easy to imagine that wealthy consumers won’t have a problem with price increases. But, what about ordinary wage-earners? Remember that almost all of the consumer products sold in supermarkets are made in other countries, such as China, Thailand, Malaysia, Indonesia, Japan, and Mexico.

Trump’s supporters simply assume the 35% tariff will not affect them as much because companies will immediately  bring back the manufacturing jobs they lost. But, this is impossible. Even if some of those jobs did come back, the labor costs would be just as high as the tariffs on imports. The retail prices of consumer goods produced in the United States will still increase, and this will not be good for the American economy in the long run.

#2: Tell the naysayers that many service jobs do not exclusively cater to the North American market.

The United States, like the rest of the world, has moved on from a manufacturing-dependent to service-based economy. This means jobs in customer service cannot be limited to North America. Multinational companies that produce global brands need customer service reps who will cater to their customers in other countries.

Moreover, service jobs in the food and beverage industry will need workers who will serve customers in offshore locations. A perfect example of this is Starbucks. Americans should not expect that they’ll be hired to serve coffee drinkers in India or the Philippines.

#3: Globalization not only opened new markets of consumers, but also sources of labor.

The rise of computing and mobile technology have made it easier for qualified professionals to work for international businesses. Companies can pay lower labor costs if they employed these workers through an offshore staff leasing provider. One’s geographic location is not that essential anymore for HR managers and small business owners.

Aside from hiring people through an outsourcing company, American businesses can also hire freelancers who can do the work remotely and won’t even need to follow the same work hours as the American employees. They have a fair advantage over them because of the time difference, which ensures continuity of operations.

What’s even more advantageous is that employees from the other side of the world can do the same kind of job, or even better than their American counterparts. Many employees in Asia are college-educated, fluent in English, and well-versed in using technology relevant to their jobs.

#4: Carefully choose which type of outsourcing to invest in based on the size of your needs and your business goals.

Ask yourself, “will my profit margin be significantly affected in a negative way if I outsource to a company within the United States?” and “will it be easier and less costly for me to outsource to an offshore location?” The answers to these questions will help you decide the best course of action.

Most of the time, outsourcing to an offshore provider proves to be the best option for small to medium-sized businesses. They lack the resources to expand locally. That’s why they seek more profitable partnerships abroad with companies that have the expertise, technology and other resources to help them grow.

#5: Do you have a strategic outsourcing plan in place?

A well-laid plan is important in making your outsourcing activities work so fittingly well. Lay out the work that you want to outsource and who you’ll be assigning to manage your offshore staff from your domestic office. Think about your outsourcing evaluation process, and the key performance indicators you’ll want measured. And, identify the preventive measures you’ll take to mitigate the risks, including the ways you can avoid facing the negative consequences of being publicly exposed as a company that outsources.

Obviously, it won’t be easy to outsource at this time. But, it’s not impossible to do. Thus, your choice of outsourcing partner plays a major role in producing a positive outcome to your decision.

An offshore outsourcing provider that has the expertise you need can help you reduce the risks of failing at outsourcing. Your partner is there to guide you and help you in times of great need. It’s a long-term commitment that both of you will be making in your mutually beneficial relationship.

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