The Economics of Outsourcing

The amount of outsourcing that is happening in today’s industries – manufacturing, software, customer support and virtually everything is astounding. You have clearly seen how outsourcing is helping you out with your tasks, but how is
it helping the freelancers, who have to do projects at cheaper rates?

With outsourcing, the freelancers are no longer bound within conventional work environments. Most of them are part-time workers, working at nights and holidays in pajamas the way they could never have done it in a proper office.

That way they can actually reduce the cost of doing work. By breaking down the company structure into a cloud of individual freelancers, a lot of middlemen are removed, and that decreases the cost of transaction.

A lot of freelancers work on unlicensed software, which you would never be able to do in-house. Since these freelancers live in countries where they can work on pirated software without attracting lawsuits, they can build websites and designs on these software at only a fraction of the cost.

If you hire an in-house employee, you have to pay on the salary structure depending on the minimum wage laws. However, by outsourcing to freelancers in other countries you can avoid these laws and pay much lower. That is because inflation rates are much lower while value for money is higher in those countries.

Also, if you approach registered larger companies instead of freelancers, they will charge you more because they have to pay taxes on their incomes. However, in most countries freelancers working from home over the Internet sit outside the tax net. And then, as the cost of becoming a freelancer is virtually nothing, there are too many of them. The shear competition and the abundance of choices pulls their prices down and make them put maximum effort into work to give them the edge.