Why Aren’t Small Tech Companies Outsourcing Work Overseas? And Should They?



There was a time when outsourcing jobs overseas was a common practice with tech companies. According to Jeff Saginor, writing for Digital Trends, approximately 62 percent of businesses in this industry relied on outsourcing practices in 2009, and many of the biggest tech companies still regularly outsource simple tasks that don’t require a lot of skill or training. Companies have always left specialized jobs such as engineering to in-house staff, but outsourcing was often a great way for companies to save money without sacrificing efficiency. Outsourcing has become more convenient than ever before thanks to technology and services that make business management, customer service and billing easier over worldwide networks.

And yet, outsourcing has fallen by the wayside for most small tech companies. Many of these companies have a lot to gain from the practice, but more and more of them are choosing to keep most or all of their work in the United States. As odd as this sounds, they may have some good reasons for doing so.

 Why Small Companies Do Not Outsource Work

There are a few reasons why a small tech company may decide not to outsource their work. According to Vivek Wadhwa at Bloomberg Businessweek, one of the biggest reasons is that these smaller companies focus on product innovation, something that is very difficult to achieve when most of a company’s work is completed half a world away. The jobs that are outsourced by large tech companies are those in IT departments and call centers. These jobs do call for some knowledge in the technology field, but it’s nothing compared to programming or research and development. For a tech company that isn’t large enough to have a substantial IT department, it may not make much sense to send work overseas; most of their work can be completed in-house with little difficulty.

Another reason why some companies may be reluctant to outsource their work overseas is because of the stigma that is sometimes attached to the practice. There are still a lot of people who are of the opinion that outsourcing means fewer jobs for US citizens. Unemployment is still a serious issue, and a CEO of a corporation could come out ahead in the eyes of the American public simply by keeping most positions in the country.

Finally, there are the logistics of outsourcing jobs. Having two teams coordinate from opposite sides of the world is tough, and many companies simply decide they don’t want to deal with it. On the other hand, management and communication software has evolved to make this task easier.

 Should Small Tech Companies Outsource Their Work?

While there are valid reasons not to outsource work, the practice still has its benefits. Since hourly rates that constitutes a living wage in other countries are considerably lower than in the United States, workers can be paid less, which in turn saves the company money. It also allows small- or medium-sized tech companies to focus more on core products and services. When the majority of IT and service positions are outsourced to an overseas call center, it leaves more room for companies to maneuver when working on big projects such as software development and research. In other words, it keeps the core employees and their talents from being spread too thin.

Whether or not a tech company should outsource work depends on the size and the nature of the company. A small business that focuses on research and development may not benefit from sending work overseas, but a larger company that focuses on IT, assembly and support lines should still consider the practice.