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Outsourcing vs. Hiring: Does it Matter?

20 May, 2021 | Bill Peatman

When you use the word “outsourcing,” images come to mind of cheap labor in far off lands replacing “U.S. jobs.” While that may be true at times in the manufacturing, it is less and less the case in our increasingly all-remote work world. Many knowledge-worker jobs are now very portable, and geography is less and less a factor in hiring. Companies from Twitter to GitHub has all but shed offices, for example. 

When everyone is remote, what is the difference between outsourcing and hiring full-time employees? Often it is simply a matter of how a worker is paid: 

  • Directly by a U.S. business as a full-time or part-time employee. 
  • Through a contract outsourcing agency/ 
  • By a managed outsourced service provider. 

In decades past, outsourcing was associated with cost-cutting measures by businesses, new generations of outsourcing are frequently driven by needs for increased business velocity and quality, and the shift to an all-remote workforce as opened the door for businesses to hire talent wherever they can find it rather than limit themselves to local markets.  

 

Traditional Hiring Being Reassessed 

“Traditional modes of hiring are being reassessed, and companies are realizing that teams don’t have to be in an office to be productive,” TechCrunch said as the pandemic-induced exodus from the office was underway. Meanwhile, 95 percent of employees have said they are more productive working from home.” 

Another benefit of the shift to remote work has been the extension of opportunities to more diverse labor pools. “In a more connected world, businesses and individuals can reap the benefits of U.S. opportunities — top technology stack, access to exciting companies and world-class research — without having to actually live in the country,” TechCrunch said. This gives global workers “best of both worlds: the comfort of home and ties to an international powerhouse.” 

 

Looming Labor Shortages 

This is important for U.S. businesses facing a shortage of skilled workers. “Talent shortages in the U.S. have more than tripled in a decade with 69 percent of employers struggling to fill positions up from just 14 percent in 2010,” according to a ManpowerGroup survey. The World Economic Forum forecasts a gap of some 97 million jobs requiring digital skills by 2025. Unlocking access to a global remote workforce, formerly known as outsourcing, can play a key role in meeting that demand WEF found that nearly half of companies plan to expand their use of contractors and other forms of contingent workers to meet demands for digital skills.  

 

Need for a Diverse Workforce 

These is also an increased need for, and value placed on diversity in the workplace—for economic and social reasons. Analysts at McKinsey have studied the relationship between diversity and financial performance for more than five years, and consistently find that companies with diversity of race, gender, economic background, and ability significantly outperform businesses that lack such diversity. The performance advantage has grown from 3percent in 2015 to 48 percent in 2020.  

Global teams make better decisions that benefit more populations, from employees to customers. In our increasingly connected world, more businesses have global customer-bases and businesses need global input into product design and business decisions.  

 

Global Distributed Workforce 

The distinction between outsourced and insource labor is dissolving with geography-based work requirements. The fact is that even the smallest businesses often rely on a blend of in-office and remote workers. A better word to describe this growing model is “distributed” work—regardless of where workers a physically located. The upside of this evolution is expanded opportunity for workers around the world, as well as for businesses to achieve better results with more diverse teams.  

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About the Author: Bill is Prialto's senior content marketing manager and writes about the future of work and how businesses can be more productive and successful. His work has appeared in the World Economic Forum Agenda blog and CIO magazine. 

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