Outsourcing as a major phenomenon in international human resource management

Outsourcing has made great controversy within a number of industries lately. Essentially, outsourcing is "the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees" (Conjecture Corporation, 2012). Yet, this movement is not as easy or pain free as it sounds. Yes, outsourcing can help keep costs down and allow a company to remain globally competitive; however, outsourcing can also cost domestic jobs here in the United States among other problems -- making it a questionable business strategy.

There are numerous advantages to the practice of outsourcing. One of the first and most obvious is the cost savings. Outsourcing helps keep costs way down because workers in other countries do not make as much as their American counterparts. Thus, "the labor savings from global outsourcing can still be substantial" (Engradio & Arndt, 2006). This helps American companies make more profit and contribute more into the underlying American economy. There are also other benefits to the practice as well. Here, the research suggests that "India sells $6.75 billion worth of software services to the U.S., the industry contributes more than twice as much to the American economy by way of hardware and software purchases, customer savings, and U.S. taxes paid by Indian workers" (Kripalani, Einhorn, & Magnusson, 2003). Outsourcing allows for companies to spread their resources, maximizing efficiency and saving money. The money saved helps keep companies afloat and in good standing, which then in turn helps strengthen the American economy. As such, "every dollar of offshoring results in 58 cents of savings to the American economy" (Reingold, 2004). Moreover, outsourcing is a way to stay competitive. With other nations like India and China beginning to really take over particular industries, the U.S. must keep up to remain on top. Outsourcing provides a cost-effective method to stay relative within an ever evolving international market place. Outsourcing is a successful strategy to make "U.S. companies globally competitive" (Kripalani, Einhorn, & Magnusson, 2003). Companies like Apple and Whiteleaf have shown great savings potential through strategic outsourcing strategies (Cassidy, 2012). Such companies have used strategic outsourcing for various labor needs within their production line. The product has not changed in terms of quality, yet the cost of production per unit has dropped dramatically, making profits increase. These profits can then be reinvested back into the company for further research and development, allowing innovative giants like Apple remains a top competitor in the personal electronics market, both in terms of hardware and the accompanying software. As such, it is clear that there are a number of benefits American corporations enjoy while turning to an outsourcing strategy.

However, there are a wide number of disadvantages that go along with outsourcing as well. Most of the disadvantages are felt on a more personal level, in comparison to the benefits seen across the organization as a whole. The worker is the one who really feels the weight of the burden from outsourcing. Essentially, one of the biggest disadvantages is the fact that outsourcing costs domestic jobs. According to the research, "so far, at east, the enhanced productivity hasn't translated into jobs at home. Offshoring is steadily eating its way into the educated classes, both in the United States and elsewhere, affecting jobs traditionally considered secure" (Reingold, 2004). The tech industry alone has seen a massive increase in unemployment rates, with it currently being at about 7% (Baker & Kripalani, 2004). With such a massive and rapid turn around, many within tech industries, as well as other manufacturing industries, are feeling the crunch. Their jobs are simply worth less overseas, and so big corporations often sacrifice the health and well being of their American labor force for cost savings found through outsourcing. As such, "it's causing real pain to real people" (Reingold, 2004). Many companies are even going as far as to relocate foreign nationals in the United States, as another competitive move to help save costs and keep operation budgets as low as possible. With so many newly educated immigrants coming from countries like India, it is easy for many companies to replace older, and more expensive American workers even on their home soil (Reingold, 2004). Overall, it is clear that outsourcing is wrecking havoc on one of America's newest and most innovative industries, the tech industry. Here, the research posits that "The IT industry in the United States has gone from being a very high-level, well-paying industry to being very low-paying sweatshop labor, and that's an inexorable trend," (Reingold, 2004). This is a disadvantage that is hitting a number of different industries. Manufacturing, tech development, and even some service industries are becoming scarce here in the United States. Therefore, "suddenly programmers share the fate of millions of industrial workers, in textiles, autos, and steel, whose jobs have marched to Mexico and China," (Baker & Kripalani, 2004). Yet, the disadvantages don't just end at the immediate unemployment of American workers. Another "danger is that high-tech horror stories -- the pink slips and falling wages -- will scare the coming generation of American math whizzes away from software careers, starving the tech economy of brainpower" (Baker & Kripalani, 2004). There is additional danger when examining the upcoming schooling and academic performances of students in countries like India and China. Many schools are far outperforming American math and science programs, further solidifying future danger for the industry here in the United States.