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To Outsource or Not to Outsource?

Bruce Scap, a business owner from Astoria, NY, explains why companies should consider all costs when deciding whether to keep labor local or outsource.

I'm the president of Galeas Consulting, a firm specializing in technology management. I assist organizations in improving IT productivity and effectiveness, and work with executive management to help their organizations leverage technology to improve core business performance.

It depends on the company. While outsourcing works for some, other companies will be more successful hiring local talent. It is not a wise decision to outsource based only on the rate you pay your workers. There are other factors to consider, including the management of international relationships, time spent coordinating projects, and differences in cultures.

When deciding whether to outsource, you must consider all the costs. Only then can you compare the price of outsourcing overseas with hiring local employees. Most people only look at the hourly rate, which by itself is only one variable and not a solid indicator of what the total outsourcing cost may be.

Sometimes outsourcing may be the only way to start your business and the best way to help a local economy. If you are manufacturing a product and are seeking investors, you will need to minimize your production costs in order to get funded. You may be forced to choose between outsourcing the manufacturing process overseas or not starting the business in the first place. You should take into consideration that if your business becomes successful, you may eventually decide to hire employees in the U.S.
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