Global Outsourcing
Over the past few years outsourcing has become a hot topic and has been debated frequently, especially when it is outsourcing jobs out of the country. In theory outsourcing is using a third-party to provide services that would otherwise be done by employees from the parent company. This in its purest form can be extremely beneficial to the company, but there is much more to outsourcing than just this. Oursourcing is a way to cut cost and improve a company’s bottom line; however it may cause a whole new set of problems for a company. It is also heavily debated whether outsourcing benefits the country who is outsourcing its jobs, or the country who is receiving the new jobs.
One way of looking at global outsourcing is looking at it as if it is a way of trading labor. It may cost a company more money in one country to pay customer service workers when they could be paying people in other countries much less money. In other words it may be cheaper for a company to use labor from another country that could perform the same tasks. This allows a workforce from another area to specialize on customer service all day at a cheaper rate. The company that is trading its labor in turn gets a service back and both sides benefit.
The main advantages to global outsourcing are cost savings and quality services (Outsourcing: Pros and Cons, 3). Global outsourcing usually leads to a cost savings, because it usually takes advantage of lower wages in countries like India. Their wages for educated employees are much lower allowing a company to save large amounts of money through wages.
Companies can also improve their quality through global outsourcing. When a company uses a third party to perform a service for their company, the third party usually specializes in just that service. In other words, if a company was to outsource its customer service to a third party company from India, the company from India would most likely specialize in customer service which could improve their customer service all together. Many people believe global outsourcing leads to new market opportunities as well as a company who outsources jobs to another country often creates a new market for its products as its new workers may be willing to buy from the company now (Outsourcing Effects, 2).
Global Outsourcing seems like a practical and beneficial thing to do for a company however it may have drawbacks. The main drawbacks can include linguistic barriers and perceived social responsibility (Outsourcing: Pros and Cons, 11). Many of the countries where companies are employing a cheaper labor force speak other languages than English. This offers a unique set of challenges as many people become upset when they can’t understand a person who is attempting to solve their problems. Many technology companies have outsourced their customer service to countries like India but have received mixed reviews as many people can become upset due to language problems and an inability of the customer service workers to understand their problems. This can have major implications for the parent company.
The second main drawback is a company’s social responsibility. This is an extremely intricate issue however as its roots are the debate of outsourcing itself. Many people feel it is morally wrong for a company to cut jobs from people in their country and create jobs in foreign countries, due to cost savings. In other words many people are strongly against companies who outsource their jobs to other companies and cut jobs in the U.S. This can greatly damage the image of the company which may be more important than saving on a company’s bottom line.
Like stated earlier a large portion of global outsourcing takes place in information areas where companies have high business costs (Insignia, 67). They outsource these skilled jobs to companies overseas who can give them labor in these areas at lower costs. This has been having an impact on the home country of many of these companies as many people have become concerned with the jobs being lost to pre-industrialized countries due to global outsourcing.
Both industrialized and pre-industrialized countries benefit from global outsourcing. Many pre-industrialized countries have jobs created due to lower labor costs and the industrialized countries are benefiting from these countries opening their markets to industrialized countries that have distinct advantages in areas like manufacturing (Barrera, 14). In other words countries like India are allowing countries like the United States to sell more of their products and services in their country due to the increase in outsourced jobs from the United States. This benefits both countries and shows the advantages to global outsourcing.
Outsourcing can hurt both types of countries however as it can greatly reduce jobs in industrialized nations and many people feel pre-industrialized nations are falling further behind industrialized nations due to the tremendous cost savings of the parent companies. As stated before many people become upset when large numbers of jobs are being lost due to global outsourcing. Overtime it has become accepted that blue-collar jobs will be lost due to outsourcing, however more and more white-collar jobs are being lost which raises major questions about global outsourcing (Barrera ,12).
Many people say outsourcing hurts the nations receiving the jobs as well. These nations are more likely to open their borders for free trade in turn gaining more jobs as a result of the outsourcing. This allows the parent countries entry into markets where they have advantages. In other words many manufacturing companies in the U.S., who are more efficient in those in pre-industrialized countries, are granted access to new markets.
This does not work both ways however as countries like the U.S. have stopped these same countries from entering U.S. markets in areas where these countries have comparative advantages. In other words due to global outsourcing (among other reasons), the U.S. has gained new markets however the U.S. still denies the same countries the ability to sell the goods they can more efficiently produce in U.S. markets. A good example of one of these markets is food. The U.S. enters markets where they can benefit but doesn’t allow the companies from these same markets to enter out markets (Barrera, 15).
In order for global outsourcing to truly benefit both industrialized and pre-industrialized nations the gap between the two must be bridged. This may mean nations like the U.S. must allow the foreign nations to enter into our markets if we are allowed entry into theirs, and nations overseas will slowly raise their wages as they become more advanced as a result of this entry. When this becomes reality nations will have comparative advantages not because of differences in living conditions, but because of ability and skills.
References
Barrera, Albino. “Who Benefits from Outsourcing?” The Christian Century. N.p., 21 Sept. 2004. Web. 22 Mar. 2010. .
Insignia, Richard C., and Michael J. Werle. “Linking Outsourcing to Business Strategy.” The Academy of Management Executive 14.4 (2000): 58-70. JSTOR. Web. 2 Mar. 2010.
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“Outsourcing Effects.” Benefits of Outsourcing. N.p., 2009. Web. 22 Mar.2010.
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”Outsourcing: Pros and Cons.” PRLog. N.p., 11 Feb. 2009. Web. 2 Mar.2010.http://www.prlog.org/10181084-outsourcing-pros-and-cons.html
