subject: Outsourcing to Foreign Countries [print this page] Outsourcing to Foreign Countries Outsourcing to Foreign Countries
In this paper I will provide the pros and cons of outsourcing to foreign countries and how it relates directly to the American economy and people. Outsourcing occurs when a company goes into contract with another company or an individual to perform a certain task which would be considered non-core to the business. The companies that the tasks are given to usually have specialization in those areas, for example a bank outsources its' paper work to another company for digitalization and safe keeping, by outsourcing the mentioned job no in-house resource or man power would be wasted on a task that is not related to the nature of the business. The third-party that is providing the outsourced task is usually referred to as service provider. The process as it was mentioned is the basic and most common definition and form of what outsourcing is; however in today's globalized world outsourcing has a very different meaning. Even though outsourcing has been part of businesses for a long time, it has changed forms in the past few decades, where once companies' outsourced simple jobs like payroll and data entry now they outsource whole departments for example call centers and human resources departments.
Outsourcing to foreign countries or off shoring was lead by the IT (information technology) industry in the 1990s when companies were hiring programmers from India to help them with preparation for Y2K. The revenues from this industry have increased to $50 billion in 2008 from only $6 billion in 2001 (Pros & Cons). From the business point of view off shoring is one of the best ways to maximize profit by offering average saving of 40% and with having the potential to reach figures up to 75%, according to Dr. Richard Feinberg the director of the center for Costumer Driven Quality at Purdue University. These savings are directly related to the fact that employees overseas will do the same quality of job or even better for one-third to one-fourth of the wages that their American counterparts demand. Outsourcing also provides companies with the chance to operate at a faster speed which in return significantly decreases their overall delivery time. There is however always the risk of operating a business in a foreign country and also harms that companies cause to the American workers whose jobs are outsourced. These risks range from political, environmental and cultural instability of the country that the company operates in and also the loss of jobs for workers on American soil whom in return will be unable to find other jobs do to their lack of skills or other reasons, this results in reduction of their spending power and in return affects the economy. By outsourcing their jobs companies don't require to maintain as many facilities in the US which decreases the amount tax that the government can collect from them. The other drawback and one that most Americans are familiar with although only related to the IT industry is the decrease in customer satisfaction, as more and more call centers move overseas, costumers become more frustrated with service providers who speak with heavy accents or whom are improperly trained. All of these cons however are primarily ignored because of the fact that profits from outsourcing and off shoring greatly outweighs things like customer satisfaction and job loss, the argument that is brought to the picture is that saving money helps companies grow and expand which in return helps the expansion and growth of the US economy.
After stating the pros and cons of off shore outsourcing both for businesses, consumers, workers, the government and the countries' economy we can only say with certainty that as long as businesses are making the significant saving that outsourcing brings they will seek to maximize their profit and keep their stock prices at a satisfactory level for their shareholders for such is the nature of business but at what point should they stop and look back at all the jobs their strategies has cost the nation, some perhaps will never do. Due to its attractiveness outsourcing and off shoring is something that will not go away but the question remains, what can be done so everyone can benefit from it. Knowing that customer satisfaction is a major factor in US businesses today due to their service orientated nature it is logical to assume that the first step should be better implementation of better training programs for call center employees or any entities that operate overseas and deal directly with American consumers, perhaps more exposure to American culture is the key for their understanding of their costumers' needs. Other actions could include providing necessary resources and training to american workers so they can become as efficient and useful as their foreign counterparts so it would be easier for them to replace their jobs in case they become victims of outsourcing.
