Outsourcing in Pakistan: Economic Benefits

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Table of Contents

Country Background
Business Proposition
Supporting Evidence and Analysis
Security and Confidentiality Threats
Poor Infrastructure and Service Delivery
Conclusion
References

Country Background

Pakistan is located in South Asia with a land cover of 881,913 square kilometers, which makes it the 33^rd largest country globally. The country borders India, Afghanistan, Iran, and China to the east, west, southwest, and northeast respectively. Additionally, it has a 1,046-kilometer coastline stretching from the Arabian Sea to the Gulf of Oman. The country’s population is over 200 million people and thus it is amongst the most populated nations of the world.

Pakistan exercises democracy as the form of administration with the executive, legislature, and judiciary arms of government. Historically, the country is a British colony and it gained independence in 1947. Geopolitically, Pakistan connects the Middle East, South, and Central Asia. Islam is the official state religion with English and Urdu being the nationally ascribed languages. The economy is sub-industrialized, and thus the country is considered a developing nation. Finally, Pakistanis enjoy free primary and secondary education and English is compulsory in all learning institutions.

Business Proposition

The thesis of this paper is that outsourcing to Pakistan is economically good. According to Rizwan, Vveinhardt, Nawaz, and Mirza (2014), business process outsourcing (BPO) is “is the delegation of one or more business processes to an external entity that in turn owns, administers and manages the outsourced process based on defined and measurable performance criteria” (p. 769). In the contemporary dynamic business environment where globalization is changing the way organizations operate, outsourcing is emerging as one of the ways to remain competitive and profitable. Pakistan is one of the low-cost outsourcing destinations due to cheap and skilled labor (Morgan, 2017). However, outsourcing to Pakistan presents various challenges, which makes this topic interesting given the inherent pros and cons of the process.

Supporting Evidence and Analysis

Outsourcing to Pakistan will present an organization with numerous economic benefits as explained in the following section.

Cost Advantages

The cost of outsourcing business to Pakistan is low. The country has a large pool of unemployed university graduates, which implies the availability of cheap labor (Umer & Naseem, 2013). In every organization, a good percentage of annual budgetary allocation goes to human resource management. Therefore, outsourcing some of the non-core functions of an organization to Pakistan would cut the annual monetary resources that go to human resources. According to Nyameboame and Haddud (2017), outsourcing some functions to Asian countries like Pakistan will cost an organization around 50% less what would be spent in Western or European set-ups. Consequently, an organization improves its profitability by saving on such expenditures.

Increased Efficiency

Outsourcing to Pakistan will increase efficiency to the involved company in two ways. First, the outsourcing entity will create room to focus on its core functions like creating a brand name and investing in research and development (Rashid, 2012). Such focus leads to better product or service delivery hence increased customer satisfaction, which translates into more profits. Second, the outsourced company in most cases specializes in a specific area of operation. Therefore, it means that the organization has a specialized workforce, which leads to timely and quality service delivery hence efficiency for the outsourcing entity.

According to McCarthy and Anagnostou (2014), the outsourced companies in most cases perform exemplary because they function in specific areas of operation. Additionally, the brand for such companies depends solely on the quality of the services that they offer. Pakistani companies in the outsourcing business understand the dynamics involved in the industry, and thus they are bound to improve efficiency for their clients through quality and timely service delivery.

Direct Access to Skilled Labor

According to Hashmi and Mansoor (2013), labor is one of the key factors of production in any organization. Therefore, companies are keen on the hiring and training process, which means sizeable resource allocation to the exercise. However, with outsourcing to Pakistan, a company gets access to a wide pool of skilled labor, hence guaranteed quality performance and service delivery (Aftab, 2017).

The outsourced companies are specific with their hiring process to let onboard only the qualified individuals for client satisfaction. The free primary and secondary education programs in Pakistan imply that most students acquire a college education. This assertion means that the outsourced companies in Pakistan will have a wide range of options when hiring their employees, hence skilled labor. Also, some of the outsourced companies in Pakistan have been in business for several years, and thus experienced workforce is guaranteed.

However, despite the numerous advantages associated with outsourcing to Pakistan, the practice several disadvantages as explained in the following section.

Loss of Managerial Control

Outsourcing either a single task or an entire department means that an organization loses control of such services. This aspect implies that the outsourcing company cannot guarantee the quality of service delivery to its clients. In most cases, companies are driven by passion, mission, and vision. Unfortunately, the vision of the outsourced company may not be in tandem with that of its client, which may lead to poor service delivery. For instance, English is a second language in Pakistan. Therefore, if a company outsources customer care functions to the country, customers may not get quality services due to the language barrier.

Such customers may end up avoiding the company in the future, and thus more resources would be used in customer acquisition. Zhang, Ashutosh, and Friedman (2015) posit, “Profitable businesses are built upon repeat customers” (p. 132). Consequently, it would be counterproductive for a company to outsource tasks at affordable prices only to lose repeat clients due to poor service delivery and spend more on customer acquisition.

Security and Confidentiality Threats

The fast-evolving business environment in the wake of the technological revolution of the 21^st century means that confidentiality is being threatened on multiple levels. In cases where the outsourcing company has to share customer information, the security and confidentiality of such data cannot be guaranteed. The outsourced company may be compromised to share such data in two ways.

The systems can be hacked or the workforce bribed to share the information, which ultimately exposes the consumers’ data to third parties. This way, a company may face lawsuits or have its brand name tarnished in case such malpractices are revealed in the future. Additionally, in cases where product designs are shared with the outsourced company, the security of the divulged information cannot be guaranteed.

Poor Infrastructure and Service Delivery

Pakistan is a third-world country, and thus most of its infrastructural systems are not reliable. For instance, Ullah (2013) argues that power blackouts are a common occurrence in the country due to poor infrastructural development in the distribution of electricity. If the outsourced companies are affected by such blackouts, service delivery will be poor due to downtimes. Consequently, the outsourcing company may end up losing important clients due to poor service delivery, which is costly in the long term as explained in the preceding section.

Conclusion

Based on the arguments made in this paper, the thesis that outsourcing to Pakistan is economically good has been proved. The pros of outsourcing to Pakistan outweigh the cons significantly. All the disadvantages associated with the practice can be mitigated by vetting the outsourced companies comprehensively to ensure quality and timely service delivery. On the poor infrastructure argument, the outsourced companies can have backup plans like installing alternative sources of energy to counter the alleged frequent blackouts in the country.

Ultimately, organizations seek to meet the customers’ expectations as a way of remaining competitive and profitable, and outsourced companies in Pakistan are not exempted from this rule. From the research, I have learned that Pakistan is amongst the most populated countries in the world, which offers international businesses an opportunity to expand their markets to the region and tap into the growing consumer base.

I now realize that English is an official language in the country and citizens enjoy free primary and secondary education. Combining these two factors places Pakistan at the world stage to reaping from the benefits of globalization as companies can outsource their operations to the country without the fear of poor service delivery. From this paper, I acknowledge the critical role of outsourcing in reducing an organization’s operational costs. The realization that one can get the same services from Pakistan at half the price of what could have been used in a Western set-up underscores the impact of globalization on the contemporary business environment.

References

Aftab, I. (2017). 10 Reasons why Pakistan is a great location for tech outsourcing. Web.

Hashmi, A., & Mansoor, A. (2013). Outsourcing trends in Pakistan. International Journal of Computer and Electrical Engineering, 5(5), 451-455.

McCarthy, I., & Anagnostou, A. (2014). The impact of outsourcing on the transaction costs and boundaries of manufacturing. International Journal of Production Economics, 88(8), 61-71.

Morgan, H. (2017). Spotlight on Pakistan: ideal for outsourcing.net, java and other tech stacks. Web.

Nyameboame, J., & Haddud, A. (2017). Exploring the impact of outsourcing on organizational performance. Journal of Global Operations and Strategic Sourcing, 10(3), pp.362-387.

Rashid, A. (2012). Offshore outsourcing of IT services as new service development: The role of change and its management. Journal of Organizational Change Management, 25(3), 445-461.

Rizwan, A., Vveinhardt, J., Nawaz, A., & Mirza, M. (2014). The business outsourcing in telecommunication industry: Case of Pakistan. Transformations in Business & Economics, 13(32), 760-779.

Ullah, K. (2013). Electricity infrastructure in Pakistan: An overview. International Journal of Energy, Information and Communications, 4(3), 11-27.

Umer, M., & Naseem, M. (2013). Employees retention (human capital) in business process outsourcing (BPO) industry in Pakistan. Global Journal of Management and Business, 11(3), 1-9.

Zhang, J., Ashutosh, D., & Friedman, R. (2015). Customer loyalty and lifetime value: An empirical investigation of consumer packed goods. Journal of Marketing Theory and Practice, 18(2), 127-139.

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