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, closed their in-house customer relations departments and outsourced their customer service to third party call centers. The next analytical extrapolation of these decisions was of outsourcing labor overseas to countries with lower labor costs, this trend is often referred to as offshoring of customer service.
Due to this huge type of demand, call centers have sprung up in India, Pakistan, the Philippines, Canada and even the Caribbean. Many companies, for instance most notably Dell and AT& T. Wireless, have gained significant negative publicity for their decisions to use Indian and Pakistani-based labor for customer service and technical support; one of the most prominent complaints being the expectation that the replacement staff will have more trouble communicating with customers.
Outsourcing and out-tasking focus on the transfer of a significant percentage of management control to the supplier. Buying products from another corporation is not considered outsourcing or out-tasking, but just a vendor relationship between the two companies. Similarly, purchasing services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust.
Companies that provide such offshoring services feel that outsourcing requires the turning over of management responsibility for running a segment of business. On paper, this industry and process segment must not be a core competency, or associated with the core business of the organization, but practice often dictates otherwise.
In fact, many organizations seek to leverage expert organizations in the areas targeted for outsourcing. Business segments typically outsourced include Information Technology, Human Resources, Facilities and Real Estate Management and Accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Outsourcing business is described, increasingly, by expertise not inherent to the core of the client organization.
A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision-making by…