Outsourcing

Source : Wise to social issues

Outsourcing is a business practice in which a company hires service providers, usually located outside of the country, to do work that the company believes can be performed more efficiently and less expensively by these outside contractors. With the advent of the Internet and high-speed networks spanning the globe, more jobs than ever before can easily be transferred to other countries. In an age of globalization, the location of workers performing many jobs has become largely irrelevant. However, the practice of outsourcing has become the source of heated debate in the United States. Many people blame much of the country's unemployment on outsourcing and are alarmed by predictions that millions more jobs will be outsourced in the coming years. To better understand the current debate over outsourcing, it is important to know a little about the history of the practice, the kinds of jobs that are being outsourced, and the countries to which jobs are being transferred.

Outsourcing is a much older practice than some people realize. In colonial days, American businesses outsourced the production of covered-wagon covers and clipper ships' sails to workers in Scotland. The raw material for these products was imported from India. A couple of hundred years later, in the 1970s, computer companies began to outsource their payroll applications to outside service providers. However, most of these jobs were outsourced to companies in other states rather than overseas. It was in the late 1980s that the practice of outsourcing began to boom. During this time the field of information technology (IT) was growing rapidly, and the demand for IT workers who could develop hardware and software exploded. As the Internet and telecommunications fields developed, companies created thousands of high-paying jobs to attract talented IT employees to work for them. As the U.S. economy faltered, however, companies had to cut their IT budgets and began to seek a less expensive labor force outside of the United States.

Outsourcing has thus become an important trend in business strategy, with many companies claiming that having offshore capabilities is crucial for competitiveness in the global marketplace. American corporations also assert that outsourcing leads to increased efficiency because it allows companies to focus on their own strengths, channeling their resources into areas in which they excel and utilizing outside labor for areas in which they are less strong. Not only does outsourcing contribute to efficiency, it is also a major source of cost-savings.

Opponents of outsourcing are concerned about the hundreds of thousands of Americans losing jobs to outsourcing. Increasingly, these displaced workers are highly educated people with advanced degrees in fields including engineering, radiology, mathematics, and information technology. They are being replaced by equally well-educated but lower-salaried workers in India and China. Although some economists argue that more education and retraining is the solution for workers displaced by outsourcing, others argue that people who have already spent years studying one field will have little motivation to retrain in another field since their jobs in the new field may also be outsourced in the future. These displaced employees may never be able to find the same quality jobs that are lost to outsourcing.