Outsourcing of tasks turns the management of a bank to another company. The managerial control is shifted to another company which operates on different standards. A general feeling is that the companies which take up outsourcing tasks are driven by the motive to make profits from the provision of their services and as such there is a likelihood of company standards being compromised.
Outsourcing involves the signing of contracts covering the details of the work to be outsourced. According to such contracts, services which are not included in the contract if offered are subjected to additional charges. Contracts in most cases require the use of lawyer services. These are additional charges which have to be incurred to ensure that the contract is not breached. It should be note that outsourcing companies have got rich experiences in these contracts and as such they are likely to take advantage of an organization (Berger, Dick, Goldberg, & White, 2007).
The operations of a bank depend on the information that keeps it operating. Outsourcing some departments or duties will lead exposure of some confidential information about a company. Outsourcing companies deal with a host of companies and as such confidential information might be at risk of being exposed to a rival bank or any organization which might be interested in the organization carrying out outsourcing. With this in mind it is always advisable that organization make careful examination before choosing a company to outsource it functions to. It should also be noted that the process of scrutinizing which company to outsource function to is time consuming which might not be available (Berger, Dick, Goldberg, & White, 2007).
Outsourcing companies are likely to compromise on the quality of the services especially when there is requirement that they should go an extra distance in their functions. The outsourcing company will aim at making profits out of the services it offers. The price of the contract is fixed upon the signing of the contract and as such the only way the outsourcing companies are likely to safeguard the profits they obtain is through the reduction of the expenses they incur. In the process of expense reduction there is a likelihood of quality being compromised.
It should also be noted that the company outsourcing its duties is denied a chance of responding to market dynamics. Banks, for instance, need high flexibility in the provision of their services failure to which clients are likely to be easily snatched by rival companies which take care of changes in the trends in the market. The outsourcing companies are less likely to respond quickly and appropriately business environmental changes since it will expense the outsourcing company.
Ramingwong, Sakgasit, & Sanjeev (2007) comment on the quality of the offshore sourcing in relation to the impact on cross cultural factors. The authors raise question of what they term as silence code whereby the company entrusted to carry out functions on behalf of another decide to keep quite even when the project which they have been entrusted to take up is not doing well. This is a big risk especially when the functions which are outsourced are major one which touches the operations of a company (Ramingwong, Sakgasit, & Sanjeev, 2007).
Outsourcing the functions of company ties it to the well being of another company. The effectiveness and operation efficiency of the company which gives out its function to be performed by another company will depend on the effectiveness of another company. If an outsourcing company runs down then all the companies whose functions were outsourced to that company are likely to be adversely affected or they may even run down (Berger, Dick, Goldberg, & White, 2007).
Outsourcing has generated negative feelings among many Americans. This has been because of the job losses associated with the outsourcing. Some Americans have ended up losing jobs due to the outsourcing activities. At the same time outsourcing has also created job opportunities for some Americans. The issue of bad publicity occurs where outsourcing is responsible for job losses (Hansen, 2009).
Durvasula, Srinivas; Lysonski, and Steven (2009) in their article explain the factors which are driving the outsourcing moves. They argue that globalization has majorly contributed to the widespread of outsourcing activities as banks in U.S. try to reduce their overhead costs in order to remain competitive in the market. The authors also bring up the issue of public opinion on the outsourcing topic (Durvasula, Srinivas; Lysonski, & Steven, 2009).
Durvasula, Srinivas; Lysonski, and Steven (2009) claim that offshoring of selected business operations to companies in overseas has garnered a lot of public concern. The authors claim that the anger against the outsourcing activities has been due job losses and the damage caused to the internal industries (Durvasula, Srinivas; Lysonski, & Steven 2009). Roberts (2009) approaches the job loss issue more fiercely. He presents a strong argument in favor of the public opinion against the outsourcing of operations particularly to overseas companies. According to him, it is only unfair that the tax payers whose money helped the American banks to make profits and grow remain homeless and unemployed (Roberts, 2009). This argument is quite valid especially if the recent bailing out of U.S. companies is factored into consideration. The bailing out process makes use of the tax payer’s money (Roberts, 2009).
Roberts (2009) argues that the unemployment rate doubled in 2009 increasing the number of unemployed people in the U.S. He further associates the offshoring activities with devaluing the U.S. dollar. He claims that the U.S. dollar has been losing its value. He believes that the rapidly decreasing value the dollar will eventually have an eroding effect on the incomes of the Americans. The purchasing power of the dollar is similarly likely to be lowered. Roberts (2009) foresees a situation in future whereby the Federal Reserve being forced to monetize treasury debt issues leads to a full blown domestic inflation break out. He points fingers at the political system for being unresponsive to a situation he believes is almost out of hand (Roberts, 2009).
Garner, Alan, and Schwartz (2004) have argued that offshoring has had adverse economic impact on the economy of the U.S. The author put the number of service jobs at the risk of being offshored as at 2000 to be fourteen million.