Outsourcing using Domestic and Global Contractors

Syllabus Topic

HSC topic: Human resources

role of human resource management

• outsourcing

  - using contractors - domestic, global

OUTSOURCING USING CONTRACTORS

Outsourcing using contractors involves hiring external individuals or companies to perform specific tasks or projects on behalf of a business. This practice allows organizations to access specialized expertise, reduce costs, and focus on core activities. There are two main types of outsourcing using contractors: domestic and global.

1. Domestic outsourcing using contractors refers to obtaining services from contractors or companies within the same country as the hiring organization. This approach offers advantages such as ease of communication, legal familiarity, and cultural alignment. Domestic contractors may be preferred for tasks requiring close collaboration or compliance with local regulations.

2. Global outsourcing using contractors involves contracting services from individuals or companies located outside the hiring organization's country. This practice, also known as offshore outsourcing, is often chosen for its potential cost savings, access to specialized skills, and round-the-clock operations. Global contractors may be in countries with lower labour costs or specific expertise not readily available domestically.

WHAT IS A CONTRACTOR

A contractor is an individual or a company hired by another organization to perform specific tasks, projects, or services for a predetermined period. Contractors typically work on a temporary basis and are not considered employees of the hiring organization. They are responsible for completing the agreed-upon work according to the terms outlined in a contract, which may include project deliverables, timelines, and payment terms. Contractors may provide specialized skills or expertise that the hiring organization lacks internally, offering flexibility and scalability to meet project demands without the long-term commitment associated with hiring permanent employees.

DOMESTIC OUTSOURCING

Onshore outsourcing, also known as domestic outsourcing, involves obtaining services from individuals or companies within the same country. Unlike offshore outsourcing, which involves contracting services from abroad, onshore outsourcing keeps operations within the country's borders. This practice is often preferred for its ease of communication, absence of cultural differences, and stronger legal protections for intellectual property. Companies opt for onshore outsourcing to access skilled workers who share the same language, holidays, and business culture, reducing the risk of miscommunication and enhancing collaboration. Although onshore outsourcing may come with a higher price tag compared to offshore alternatives, it offers benefits such as easier communication, greater quality control, and improved protection of intellectual property. Examples of onshore outsourcing include a local business outsourcing cleaning services to a nearby company and financial institutions keeping customer data within their own country for legal compliance. Comparatively, offshore outsourcing is favoured for its lower labour costs, making it suitable for organizations seeking to save money on skilled technical labour or repetitive IT services.

GLOBAL OUTSOURCING

Global outsourcing, also known as offshoring or business process outsourcing (BPO), involves hiring external companies or individuals located in different countries to perform business functions. This practice is commonly employed to reduce costs, access specialized skills or technology, and enhance efficiency. Global outsourcing encompasses various types of work, including manufacturing, software development, customer service, and administrative tasks. It has gained traction in recent years due to technological advancements facilitating cross-border communication and collaboration. The global business process outsourcing (BPO) industry was valued at $251.1 billion in 2022 and is expected to reach $435.89 billion  by 2028. Cost reduction is recorded as a primary objective for 84% of executives in outsourcing, where 40% of executives cite flexibility and scalability as key reasons for global outsourcing, while 83% of leading IT organizations consider partnering with global outsourcing services to address digital threats. Global outsourcing offers benefits such as cost savings, improved efficiencies, scalability, and access to a global talent pool, enabling organizations to achieve their growth objectives and remain competitive in the global market. However, potential challenges include language barriers, cultural differences, and data security risks, necessitating careful consideration when selecting outsourcing providers and locations. While global outsourcing can provide job opportunities and economic growth in offshore locations, it may also raise ethical concerns related to labour practices, exploitation of labour from developing economies, data privacy, and social impact.

CASE STUDY: COLES AND WOOLWORTHS- Robot Warehouses

Coles and Woolworths' response to the surge in online grocery shopping reveals the complex interplay of human resource management amidst technological advances and evolving labor models. By adopting warehouse automation and leveraging gig workers via platforms like Uber and Airtasker, they aim to meet increased consumer demand while adapting to flexible labor needs. However, this strategic shift raises concerns about job security, especially for unionized warehouse staff displaced by automated systems. The inclusion of gig workers, while enhancing operational flexibility, highlights disparities in job stability between traditional employees and those on contingent arrangements. These developments underscore broader societal challenges, balancing efficiency gains with equitable employment practices in the evolving retail landscape. As Coles and Woolworths reshape supermarket operations, the implications for labor relations and the socio-economic environment are profound and warrant careful consideration.

Sources

Business.gov.au: Employee or Contractor

TechTarget: Domestic Outsourcing

Microsourcing-probeCX: The Benefits of Global Outsourcing

CX Focus Magazine: Global BPO market worth USD 251.1 Billion

Deloitte: 2021 Global Shared Services and Outsourcing report

Insider HR: Ethical Dilemmas: Exploring the Moral Implications of Outsourcing

The Conversation: Coles and Woolworths are moving to robot warehouses and on-demand labour as home deliveries soar