This article focuses on the ways in which outsourcing impacts virtual teams. It considers some of the managerial, business and social issues that are associated with moving from an internalized delivery model, to one where at least some part of a business is outsourced.

What Is Outsourcing

To provide some context to this article it is important to define how outsourcing is being used here.  In this article we consider outsourcing to be the process by which a business function or task such as engineering, HR, payroll, manufacturing, shipping etc. are undertaken by an organisation other than the principal. For instance, a company that traditionally has undertaken its own R&D, engineering and manufacture may choose, for business reasons, to send some or all of its engineering to a different location to be undertaken by a different company.

The outsourcing decision is typically made for one of the three principal reasons, namely;

* Access to specialist skills not readily available at the home of the business.

* Access to workers at a lower cost than in the home of the business

* Access to a volume of workers not available in the home location of the business

There are, of course, hybrid reasons why businesses will outsource work, but typically these three cover the vast majority of causes.

Impact of Outsourcing

The impact of outsourcing is a very complex one. At its simplest level, outsourcing can be seen as shipping jobs to another location and, this is sometimes the case. However, properly managed and structured, outsourcing can result in the business and its home office being able to expand through being able to undertake additional projects with its in house staff while at the same time providing work in other locations.

Outsourcing of some parts of a business can mean that the business, which may not have been viable with a sole location delivery model, is suddenly revitalised and is able to maintain some local employment, local employment that may otherwise have disappeared. It may also be able to give more stable or more varied work to its staff and avoid being too exposed to local variations.

Business Impact

Outsourcing of some tasks can also mean the difference between a project going ahead and that same project not happening. The outcome of some of these same projects can then lead to long term broader employment in a region, employment that is generally welcomed by the community as a whole. As such, from a business perspective, outsourcing can add value to the business, its shareholders and, where managed well, the broader community. It can also bring employment to developing nations, given that this is often where outsourced manufacturing is sent.

Done badly, outsourcing can lead to a severe social impact on the home office location where the work is moved from. Badly managed or ill-conceived outsourcing can also, on occasion, result in exploitation of the workers to which the work is outsourced, something which is reported in the media from time to time.

As such, the business impact of outsourcing needs to be carefully balanced. Businesses need to deliver a fair and reasonable profit to their shareholders but, also must maintain their social license to operate. Allowing the pendulum to swing too far in either direction is not good for the long term sustainability of the business, nor the social environment in which these businesses operate.

Social Impact

The social impact of outsourcing needs to be judged from a number of different perspectives. For the personnel at the location the work is moved from, outsourcing will be seen it as a bad thing, at least during the period of adjustment when their jobs are transferred overseas and they must seek work in outer businesses or industries. For those receiving the outsourced work it will be generally be seen as a good thing,