INTRODUCTION 3
THE HISTORY OF OUTSOURCING 4
HOW IS IT POSSIBLE? 6
WHY DO WE OUTSOURCE 10
WHO ARE WE OUTSOURCING 12
THE FUTURE OF OFFSHORE OUTSOURCING 13
CONCLUSION 16
BIBLIOGRAPHY 17
Introduction
Offshore outsourcing is not a new practice in the United States. Offshore outsourcing of information technologies services, however, is relatively new to our nation. It is a hot issue in political debates, with this being an election year. Job loss and job creation in the United States is on the platforms of leading candidates. Economists are projecting that the offshore outsourcing of certain types of jobs will in fact create jobs here at home, ultimately benefiting the labor force and our economy. While there is not significant statistical data yet to support this theory, if one looks to the history of outsourcing as a whole, it does not seem an impossibility. But why are we outsourcing these jobs? What are the factors that have brought us to this place in the labor market? What caused employers to look to other countries for employees?
The purpose of this short study is to consider these questions and provide some thoughts as to where we are now, how we got here, and where we are headed with offshore outsourcing of information technology jobs.
The History of Outsourcing
Outsourcing is the process of subcontracting services and operations to other firms that can provide them more cheaply or better . Companies outsource tasks, projects, and sometimes even entire operations. Offshore outsourcing, then, would be outsourcing to firms in other countries. This practice is not new, just as the loss of jobs here in the Untied States to other countries is not new. The automobile industry and the steel production industry were hit by outsourcing long ago , as factories were built in other countries and manufacturers hired workers at lower wages to produce parts and products. And even before this, workers actually lost “skilled jobs to low-wage foreign competition” as long ago as the Industrial Revolution . In the 1800s British skilled weavers were protected by the gov...
... middle of paper ...
...eet Journal Online March 11, 2004 http://online.wsj.com/article_print/0,,SB107895848171851814,00.htm April 1, 2004, 1.
Evans, Bob “Business Technology: Offshore Outsourcing: A Means to an End” July 28,2003, http://www.informationweek.com/story/showArticle.jhtml?articleID=12803181 , 1.
David Gardner, “Report: Global Outsourcing Helps software and Services Industry” March 30, 2004. http://www.informationweek.com/story/showArticle.jhtml?articleID=18600301 , 1.
Griffin, Ricky W. Fundamentals of Management: Core concepts and Applications (Boston and New York: 2003), 440.
Hagerty James R. and Jon E. Hilsenrath, “Job Growth Falls Short of Estimates” The Wall Street Journal, March 8, 2004, A2.
Kotler, Philip Kotler on Marketing (New York: The Free Press, 1999), 3.
Mehlman, Bruce P. “Offshore Outsourcing and the Future of American Competitiveness” www.technology.gov/Speeches/BPM_2003-Outsourcing.pdf, 3.
Joanna Slater, “India’s Economy Grows 10.4%, Outpacing China’s” The Wall Street Journal, April 1, 2004, B4.
Brink Lindsey, “Job Losses and Trade: A Reality Check” Trade Briefing Paper No. 19, 8. The CATO Institute, http://www.freetrade.org/pubs/briefs/tbp-019es.html
“Present two arguments for and two arguments against a U.S. company offshoring the management of its customer relationships to technical and managerial personnel in a less-developed country.”
Outsourcing is a complicated and a multifaceted subject that involves a “business[’s] purchase of parts or labor from another company rather than maintaining a sufficient enough number of its own employees to do the same work in the country where the company is already based” ("Outsourcing"). The first practice of outsourcing was in medieval times when “nation-states called in soldiers-for-hire to help their own military forces during ongoing conflicts” ("Outsourcing"). Many think of outsourcing as a one way trade of production facilities moving outside of a companies locale but in actuality it is a two way trade that also involves companies from other areas moving their factories to local areas where conditions are beneficial for the specific business. Outsourcing has evolved but the main idea has remained the same. The recent increase in outsourcing “was initiated by Wall Street pressures on corporations . . . . for increased profits . . . in the production of goods and services marketed in the U.S."(Roberts).
It is difficult to determine whether offshore outsourcing has a positive or negative effect on the U.S. economy. It may actually depend on which perspective you take on it. As stated by Hira and Hira (2005), outsourcing in the services sector is a major shift in how the economy operates and will have serious impacts, both positive and negative, on the trajectory of economic growth, distribution of income and the workforce. However, there are many factors to take into account when considering globalization. Companies must familiarize themselves with the various rules and regulations of global business, tariffs, trade agreements and barriers, and decide how to go global; global consistency or local adaptation. All of these issues affect a company’s plan to move forward with offshore outsourcing.
As the problem of job outsourcing becomes more of an issue in politics, elected officials like the President and Congress will no longer be able to ignore the dilemma. The war in Iraq has been at the forefront of the presidential race but the importance of outsourcing American jobs seems to have been slightly overshadowed. If the issue of outsourcing is not watched carefully and a definitive plan hammered out, a trickling down of negative effects may occur within the U.S. economy. However, there is a polarized opinion on the effects of this “phenomenon”.
Since the concept of outsourcing was introduced it has been a subject of debate between politicians and citizens of the United States. Remarkably, it was the United States who supported outsourcing and now it is the United States that feels its economic progress is being threatened by outsourcing. One may argue that the financial situations that existed two decades earlier are not the same as they are today, thus the change of time, business priorities of economies have also changed.
This report is extremely credible and qualified, as it was written by an author who is well-versed on the topic. The author was also the Assistant Secretary of the Treasury in the Reagan administration, making him even more authentic source. Throughout the article, the author discusses and examines the words of two other authors, Ron and Anil Hira, who are experts on the subject of American Outsourcing. These authors are also very credible; one is a professor at the Rochester Institute of Technology, and the other is a professor at Simon Fraser University. Additionally, the author refers to many case studies that were taken at different universities in order to justify his claims on why American Outsourcing is bad. The intended audience is
Kibbe, C. (2004). Outsourcing” the good, the bad, and the inevitable. New Hampshire Business Review, 26(14), 1A.
Global outsourcing first became popular in the apparel and textile manufacturing industries during the late 1960’s and 1970’s. Then it continued with automotive, computers, electronics, and other forms of assembly work during the 1980’s. Most recently, during the 1990’s, now and also in the future the outsourcing is focused on ‘knowledge’ work such as work in software design, technical support, telemarketing, call centers, and back office work. By the end of 2009 Information Technology outsourcing (ITO) revenues were over US $250 Billion while for Business Process Outsourcing (BPO) were more than US$ 140 billion. By 2006, over 200 firms from the Forbes 2000 companies and almost half of the Top Global 250 had offshored IT and business process activities. By 2008 India was managing 65% of the ITO and 43% of the BPO market. In general, India, China, Latin America, Philippines and Mexico have been the top locations for offshoring. The United States is a major player in the offshoring of IT and business process, however, Europe is also catching up. The growth of global sourcing sparked due to the technological advances in the telecommunications industry and the internet w...
Froma Harrop’s essay New Threat to Skilled U.S. Workers is a detailed and factual essay about the mystery of job-outsourcing. She also mentioned the long-term effects of the issue on our economy. Harrop’s audience for her essay leans towards skilled U.S. workers who are unaware that many jobs are moving overseas, but includes young college students as well. At the beginning of the essay Harrop immediately starts with an account from Alan Blinder, a Princeton economist. She describes his great displeasure after hearing how enthusiastic U.S. executives were while discussing job-outsourcing. Another pertinent piece of information included in Blinder’s account was his prediction that a great amount of jobs would be lost in the near future. “We speak of computer programing, book-keeping, graphic design and other careers once thought firmly planted in American soil” (Harrop 130) Harrop’s use of other sources helps give more credibility to the essay; however, it can decrease the complexity. Aft...
The significant level of outsourcing programs used across all business sectors is well documented in the literature (Bender 1999; Quinn 2000; Dun and Bradstreet 2000; Klaas, McClendon and Gainey 2001). Past research has progressed along several paths. First, some researchers have focused on motivations and reasons for outsourcing activities (Conner and Prahalad 1996; Greer et al. 1999; Sinderman 1995; Mullin 1996; Grant 1996; Frayer Scannell and Thomas 2000). According to this perspective, the global imperative for outsourcing accelerates as firms evolve from sellers of products and services abroad to setting up operations in foreign countries and staffing those operations with host countries or third party nationals (Greer et al. 1999). Most corporations believe that in order to compete globally, they have to look at efficiency and cost containment rather than relying strictly on revenue increases (Conner and Prahalad 1996). As companies seek to enhance their competitive positions in an increasingly global marketplace, they are discovering that they can cut costs and maintain quality by relying more on outside service providers for activities viewed as supplementary to their core businesses (Mullin 1996; Grant 1996).
Kibbe, C. (2004). Outsourcing: the good, the bad and the inevitable. New Hampshire business review, 26(14), 1A.
Kibbe, C. (2004, 07 09). Outsourcing: the good, the bad and the inevitable. New Hampshire Business Review, pp. 1A-21A.
Outsourcing raises an ethical issue, as so many blue collar workers, as well as well-educated white collar workers in the US have lost their jobs due to outsourcing. Especially, many who work in the field of technologically advanced services and software were exchanged for the workers in poorer countries for cheaper labor costs. Many of the multinational companies moved their manufacturing sectors to Mexico, China, or India. According to the article, "The Battle Over Outsourcing" (2004) by Bob Davis, et al. illustrates that many of the software programming work has been relocated to India over the years. Offshore outsourcing started with low-income jobs such as call center operators, and spread to high-paid computer ...
[4] Gupta, Sachin. For a global software company, outsourcing began at inception . World Paper. April 19. 2004 http://www.worldpaper.com/2004/april/april4.html
Outsourcing has been around for many years. In this paper I will discuss some of the history of outsourcing, the goods things about outsourcing, and the bad things about outsourcing.