Outsourcing: A Net-Positive? Positively Not
The world economy is a very different beast than it was even a decade ago. No longer are countries, industries, and companies bound by national borders or even continental structures.
Rather, the global village truly exists today, at least from a capitalistic perspective. A perfect example of this borderless world economy is the process of outsourcing.
There exist several points that politicians make in support of outsourcing in America. These points attempt to prove that outsourcing is a net-positive for the American economy. For instance, they argue economic efficiency -- that outsourcing has improved productivity and growth and has created more jobs and has left our economy stronger.
The correct string of argument, however, dictates that outsourcing is a burden on our economy. How can outsourcing possibly be a positive force for our economy and help us when in reality it forces jobs outside of the country -- creating a net job loss for Americans?
No, in reality, outsourcing only hurts America. We lose jobs while workers in other countries who do not pay our taxes or pay into our social security benefit from cheaper labor rates.
Outsourcing (or contracting out, from its earlier iteration) is most frequently defined by economists and policy makers as the delegation of non-core operations or jobs from internal production to an external entity (such as a subcontractor) that specializes in that operation.
Outsourcing is an economies of scale and labor cost decision that is often made to focus on core competences. One particular portion of the term (offshoring) also means shifting jobs and departments and competencies to another country, either by hiring local subcontractors or building a facility in an area where labor is cheap -- this, of course, is the focus of this position paper. Offshoring became a popular buzzword in business and management in the 1990s. EDS -- Ross Perot's venture -- was the first company to establish the outsourcing business.
Outsourcing is defined more particularly today as the management and/or day-to-day execution of an entire business function by a third party service provider.
The overhead costs associated with customer service -- the function that is typically offshored -- are typically lower in situations where outsourcing has been used leading to many companies, from utilities to manufacturers,...
They grant significant respect to women, which allows them to easily adapt to the workplace. Humor is not valued within the Indian workplace, their culture encouraging formal relationships between employees. The Work Environment in the U.S. The U.S. work environment is significantly different than that in India. The business environment in the U.S. is results-oriented, encourages and support performance, efficiency, and productivity. The U.S. managers are trained in time management, given
The U.S. Department of Commerce reports that services to foreign clients brought Americans $131 billion in 2003. This was in addition to offshore services for U.S. customers, which grew by $7 billion. The report shows that labor-intensive production and administrative work has grown in low-cost places, while talent sensitive activities have grown in the United States (Malachuk, 2004). This is a major benefit of outsourcing. Weidenbaum (2005) argues that many American employees
Outsourcing is an inevitable market reality, however, adequate measures must be taken to support the displaced employees, and to retrain them for better employment prospects. Outsourcing has become a highly controversial and much debated issue over the last few years. The economic dynamics of the 21st century have vastly altered the mode of business. While globalization has opened new markets for companies, at the same time, it has forced them to
Ltd., 2007). Furthermore, by 2008, real GDP is expected to be $124.2 billion higher than it would be in an environment without it software and services offshore outsourcing (Flatworld Solutions Pvt. Ltd., 2007). Finally, over the last 10 years, the economy has created an average of 3.5 million new jobs a year, and the vast majority of displaced workers are re-employed within six months. According to Flatworld Solutions Pvt. Ltd.
Offshoring is occuring across a variety of job functions in areas such as IT, manufacturing and the service industry. Functions that easily be digitized or handled by phone or that involve skills that are available or easily developed are all fair game (Hoffman). The range of functions is substantial and increasing over time. Currently, major areas are depicted in Figure1, Offshoring Opportunities Across the Organization. According to some experts such
Ethics in Outsourcing The subject of ethics when it comes to outsourcing is a very complex one with people falling mostly into one of two camps. Indeed, many companies and their executives are focused on keeping costs down and stakeholders or shareholders happy. However, just looking at the bottom line can be ethically perilous due to the defined, protracted and very real effects that outsourcing has in the countries to which
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