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Outsourcing- out•sourc•ing (out sôr s ng, -s r -) n.: <business> Paying another company to provide services which a company might otherwise have employed its own staff to perform, e.g. software development(dictionary.com) Outsourcing is becoming a common occurrence for industries in the United States. In order to save money, time, and employees, companies are hiring outside businesses to conduct operations for them, especially in the technology field.
Many companies are choosing to use outsourcing. For example, government agencies are outsourcing. “Offshoring is going on to some degree in just about every State Government. At least 18 firms that specialize in offshore outsourcing are positioning themselves in no fewer than 30 States to capture a large share of the State Government market, especially in IT services," said the study, titled `Your Tax Dollars at Work... Offshore: How foreign outsourcing firms are capturing State Government Contracts'.” (sify.com) Unfortunately, most state governments do not even realize they are offshoring. Many governments subcontract work and never bother to find out where the work is actually being done. They assume that, because the company has a US office that the work is done in the US. However, there are several companies that simply have an office in that state but actually are owned by a parent company in another country. “As subcontracting is common, States are often unaware of the exact identity and location of the company that ultimately performs the work.” (sify.com)
Companies are outsourcing for several reasons. Mainly, it can save a company a lot of money. If a business can outsource to another company, locally or internationally, and get a job done cheaper than if they did it in house, why would they not? Information technology is one of the most common outsourced areas. This can be for several reasons. It is extremely expensive and time consuming to set up one’s own IT department. A company may also not have the resources and people to run such a department (cica.ca) “Outsourcing is also a common option for minimizing start-up times and avoiding the high costs of entering new markets” (cica.ca) Next, outsourcing can by used for efficiency. The outsourced IT company will be better versed in what technology would fit a particular business.
Outsourcing often provides access to advanced technology that can result in distinct technical leadership.
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All of these reasons can account for a specific business to outsource to other companies for IT needs and resources.
There are other benefits to outsourcing. “‘Offshoring’ generally means moving resource costs from a developed G-7 nation to low-cost, developing countries. It began in information technology (IT) in earnest in the mid-1990s when companies outsourced the job of making their legacy systems Y2K-compliant (that is, able to accept dates of year 2000 and beyond)” (sourcinginterests.org) When this began it helped to bolster a global economy and provide work and wages that, internationally, were not possible. Many countries, primarily in Southeast Asia, and more specifically India, took advantage of these opportunities. Now, India is one of the leading countries that provide outsourcing opportunities for US businesses.
Despite all of these benefits, there are several pitfalls to outsourcing, especially offshore outsourcing. Many companies use this method of outsourcing to save money. However, much of time, the company is not being fair to their employees internationally. A company may be saving money by not having to pay their employees minimum wage of $5.35 per hour and not having to provide medical insurance and benefit plans. They may also be able to save on safety standards in a factory. However, these people are working long, hard hours for little pay, almost nothing. There are also problems here in the country when companies choose to offshore. There are less job opportunities because local factories, offices, and locations close. This directly affects the unemployment rates and economy.
After learning and researching about outsourcing, my recommendation is that outsourcing and offshoring can be a wonderful thing. I emphasize can be! It can be hugely beneficial to economically bankrupt countries to help bolster their economy and help their citizens to survive. It can help local companies keep focus on what is important in their business and allow them to get the support, in IT areas, that they need with out having to have their own specialist on staff. However, when a company outsources to another company and people lose their jobs to a “better market” and employees in the outsourced company are not treated fairly or properly there are is something wrong. I believe that if a business outsources ethically and keeps the standards that they would want in their own company, this can be a wonderful opportunity for many people.
Outsourcing, is basically, very simple. When a company wants to, for various reasons, hire an outside company to handle an area of their business they are outsourcing. This can be a wonderful opportunity to save money, foster the economy, and increase employment worldwide. However, this can also, create problems of ethics, morality, and abiding by the law when outsourcing internationally.
I have learned a lot from writing this paper. It may not be exactly what you are looking for, however, I learned that nothing is cut and dry, simplistic, black and white. Something like outsourcing is a very complicated issue. There are positives and negatives. I am not sure one side is stronger than the other. I think, overall, for outsourcing to be as wonderful as it can be the people that set up the companies must be ethical and uncorrupt. It cannot reach its potential if factories and companies are shortchanging their employees. If the outsourced company throws basic rules and regulations out the window in order to cut costs and further their own agendas, outsourcing may not be worth it! I suggest that if a company chooses to outsource, they do careful research as to who this other business is and what their policies are. I would want to be sure that the company is treating its employees well and truly helping people and not taking advantage of another group of people in order to hold down costs. It is not ok to use child labor to make clothes cheaper and it is not ok to pay someone in India next to nothing in order to get a database made for less.
The Canadian Institute of Chartered Accountants: Information Technology Advisory
Committee. http://www.cica.ca/multimedia/Download_Library/Research_Guidance/IT_Advisory_Committee/English/eIToutsourcing0204.pdf. Accessed 7/20/04
Computer Networking Online Magazine.
http://compnetworking.about.com/cs/careersjobs/a/career_outsourc.htm. Accessed 7/20/04
Dictionary.com. http://dictionary.reference.com/. Accessed 7/25/04
Sify Finance. http://sify.com/finance/fullstory.php?id=13528798. Accessed 7/22/04
Sourcing Interest Groups. http://sourcinginterests.org/fbpo.htm. Accessed 7/20/04