The Benefits of Business Outsourcing

Outsourcing certain aspects of a company’s operations is an accepted business practice. The generic term is business process outsourcing (BPO), although many still think that BPOs are limited to call centers. Business Process Outsourcing, as the name indicates, is contracting out certain operations and functions/processes of an entity to a third-party service provider. Some sectors are specialized, such as the Medical Process Outsourcing and Legal Process Outsourcing.

BPO could cover international and Philippine-based principals. The functions of a few employees or an entire division could be outsourced. Outsourcing could be undertaken by newly established companies or by establishments already operating for years. It could be done in a system-wide reorganization. The only limitation is the protection of the rights of workers.

The process of streamlining productions need not be undertaken only when there are financial difficulties or serious business losses. The employer can always adopt new policies “conducive to a more economical and effective management”, so long as it does not violate provisions of labor laws and regulations.

Labor groups have long criticized the growing practice of outsourcing, which is also called “contractualization”. The balance of interests between capitalists and labor will always be there. Capitalists work to increase the return of its investments. Workers seek security of tenure and higher benefits.

Still, courts recognize the right of employers to a reasonable return of investments, including the “to adopt such measures as will promote greater efficiency, reduce overhead costs and enhance prospects of economic gains”.

The phasing out of Smart Communication’s entire sales and marketing departments is a case in point. The Supreme Court upheld the outsourcing of the sales and marketing group, which resulted to the termination of its existing employees. There is nothing wrong in Smart’s decision to outsource the corporate sales market in order to attain greater productivity. The third-party provider has the “necessary technical expertise required for the value-added services”. The new company is a “more competent and specialized organization to perform the work required for corporate accounts”, which incidentally freed Smart from “all administrative costs – management, time and money-needed in maintaining” the previous department. (Smart Communications, Inc. vs. Astorga, G.R. No. 148132, 23 January 2008)

There are benefits to manpower or HR outsourcing, the reason why the trend is increasing. Of course, there are other cases wherein the purported reorganization was struck down as violative of the employees’ security of tenure. However, as shown in the illustration, a legitimate management decision to achieve a more streamlined and cost-efficient operations is valid.

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