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The Truth about Outsourcing

The Truth about Outsourcing

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Published by Irfee
People outsource a lot in their lives, but may fail to recognize doing so. For example, a housewife sent her daughter to elementary school and decided to start working. She hired a household helper to take care of the house so that she could enter the job market and earn some money. This housewife is outsourcing, and her choice of doing so is necessary and preferable. Actually, outsourcing in daily life is unbelievably handy. “We do outsourcing in our everyday lives, such as dining out, whereby we purchase our prepared food from an external source instead of making the meal ourselves”
People outsource a lot in their lives, but may fail to recognize doing so. For example, a housewife sent her daughter to elementary school and decided to start working. She hired a household helper to take care of the house so that she could enter the job market and earn some money. This housewife is outsourcing, and her choice of doing so is necessary and preferable. Actually, outsourcing in daily life is unbelievably handy. “We do outsourcing in our everyday lives, such as dining out, whereby we purchase our prepared food from an external source instead of making the meal ourselves”

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Categories:Types, Research
Published by: Irfee on Dec 21, 2012
Copyright:Attribution Non-commercial

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01/30/2013

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The Truth about Outsourcing
People outsource a lot in their lives, but may fail to recognize doing so. For example, ahousewife sent her daughter to elementary school and decided to start working. She hired a household helper to take care of thehouse so that she could enter the job market and earn some money. This housewife is outsourcing, and her choice of doing so is necessary and preferable. Actually, outsourcing in daily life is unbelievably handy.“We do outsourcing in our everyday lives, such as dining out, whereby we purchase our prepared food froman external source instead of making the meal ourselves”
In the past several years, multinational companies based in developed countries have increasinglyturned to developing countries to carry out some of their business activities. This phenomenon, looselycalled
outsourcing 
or 
offshoring,
is the transfer of some aspect of a company’s business activity toanother company in another country. Typical outsourced business activities include data entry,accounting, and information technology support. Even tax returns are being processed by foreigncomputer operators. These forms of outsourcing have helped create tens of thousands of jobs in somedeveloping countries. At the same time, however, fears have grown among workers in developedcountries that their jobs could be outsourced.Outsourcing is not a new development in the global economy. Some author, traces its roots to whalingfleets and floating factory ships of the late eighteenth century. Economist, the more recent example of Motorola in the 1960s, when the company outsourced its labor-intensive assembly process to Malaysia,Korea, and Monterrey, Mexico. As is often the motive for outsourcing, the move allowed Motorola tocompete effectively with other firms in the United States and, later, Japan.Despite the growth in outsourcing around the world, or perhaps because of it, opposition has grownsignificantly in many developed countries. In the United States, for example, the former chief executiveof Intel, Craig Barrett, believed U.S. workers face the prospect of 300 million well educated people inIndia, China, and Russia who can do effectively any job that can be done in the United States.” For opponents of outsourcing, the problem is not just low tech manufacturing jobs; more and more high- paying, white collar service sector jobs are being outsourced as well. According to Deloitte Research,two million financial sector jobs could be outsourced by 2013. Economists put it , “The worldwide pool of available well-trained workers is much larger, and they are only a mouse-click away.
 
The paper discusses the potential costs and benefits for both categories of countries, developed anddeveloping. And also we would be discussing for and against the arguments from both sides, to giveyou critical look.
 
Delta Airlines outsourced 1000 call center jobs to India in 2003, saving $25 million in the process. Withthose savings, however, Delta was able to add 1,200 reservation and sales positions in the UnitedStates. University of Chicago political scientist Daniel W. Drezner points out that 3.3 million lost jobstranslates into only 220,000 jobs lost to outsourcing per year 
 
That’s a small number compared to thenumber of jobs in the overall U.S. economy: 130 million. Thus, outsourcing should affect less than 0.2 percent of employed Americans each year.According to N. Gregory Mankiw, former chairman of the president’s Council of Economic Advisers,outsourcing helps American companies stay profitable and improves their productivity. According toRobert Reich, who served as labor secretary under President Bill Clinton, “Outsourcing does not reducethe total number of jobs in America. If other countries can do something cheaper we ought to let themdo it, and concentrate on what we can do bestCatherine L. Mann of the Institute for International Economics, a Washington research group that backsfree trade, calculated that lower costs due to globalized production accounted for 10 percent to 30 percent of the decline in hardware prices during the technology boom of the second half of the 1990s,when computer prices fell 10 percent a year. Moreover, the U.S. GDP grew by $230 billion between1996 and 2003, thanks to outsourcing of information technology productionInterest groups that back American workers such as Rescue American Jobs, Save U.S. Jobs, and theCoalition for National Sovereignty and Economic Patriotism are pressuring the federal government tostem the flow of jobs overseas. If the U.S. government decided its workers needed protection andinvestment in developing countries dropped, those countries would be significantly affected. Wouldsuch a move be viewed positively or negatively in developing countries?By the start of the 21
st
century,
outsourcing 
was a household word in many countries around the world.Most of the press reports in developed countries, however, highlighted the potential risks to jobs andnot the potential benefits to developing countries. This changed, in part, because of reporting by
 NewYork Times
columnist Thomas L. Friedman, who looked at the impact of outsourcing not only on theadvanced countries but also on the developing countries, especially India.

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