Outsourcing Pros and Cons
This paper will examine the past, present, and future impact of the business trend called outsourcing and its effects on both manufacturing and non-manufacturing industry sectors, as well as the U. ... The scope of this report will begin with a broad and comprehensive view of economic statistics and empirical data which will be referenced to determine the actual significance and effects of outsourcing, as well its potential influence on future job creation and wage inequality in the U. ... The scope of the discussion will then narrow to focus on outsourcing in the technology sector. ... Outsourcing Defined The term “outsourcing” refers to seeking resources outside of an organizational structure, usually to save money and/or exploit the skills of another entity (Ladbrook, 2004). This is typically used in terms of the business world, where outsourcing often entails an enterprise using another company, such as a consultancy or application service provider, to provide a service that the enterprise can provide for itself, yet it is cheaper to utilize a third-party’s resources. ... Historic Data A great deal of research has been conducted on the discernable aspects and practice of outsourcing. In a literal sense, outsourcing has been practiced for centuries (Economist, 2004). ... outsourcing began in the manufacturing sector, particularly in the automotive industry. ... To date, outsourcing has become a heated topic for debate. ... For example, according to the Outsourcing Law & Business Journal, Vol. ... 9 (September, 2003), an estimated 30,000 new outsourcing related jobs were announced by U. ... According to a report published by the International Data Corporation (IDC) named, “Outsourcing in the Manufacturing Sector - Where Is It At” (Dec. ... This is part of a long history of foreign outsourcing in U. ... As pointed out in the article entitled, “Selling Customer Relationship Outsourcing into the Manufacturing Sector,” (Datamonitor, 2003) the outsourcing of parts of the supply chain of manufacturing has resulted in a shift of demand, as well as jobs, from blue-collar to white-collar and from manufacturing to services, increased wage inequality between these two factions, and the increased profitability of U. ... When the paradigm shifted from outsourcing blue-collar jobs to outsourcing white-collar jobs, the software industry was the first sector to send a significant amount of work overseas. ... According to India’s National Association of Software and Service Companies (NASSCOM) their country’s information technology enabled services (ITES) sector, the primary destination of business services outsourcing from Western countries, now employs over 200,000 people with approximately $2. ... By then, the business process / business services outsourcing (BPO/BSO) sector will employ more than two million people and support over eight million jobs in the Information Technology industry as a whole. The recent downturn and the continuing jobless recovery have legitimately given rise to the question whether services outsourcing involves the transfer of U. ... Table 1 shows employment data for those sectors of the economy that felt a disproportionate impact of outsourcing. ... However, outsourcing that began as a response to very tight labor markets in 1999 has continued, becoming a factor in the job loss recovery of 2003. ... There is a shared belief among business service workers that suggests any job involving sitting at a desk, talking on the phone, and working on a computer is a job under threat for outsourcing. This thinking, albeit a generalization, may have some validity, especially when one considers the advantage of outsourcing’s cost benefits and well-educated, highly-skilled workers. ... 3 million jobs will have been irretrievably lost, almost one fourth of our estimate of total employment in outsourcing occupations at risk in 2001. This translates to a little over 250,000 per year, a number which seems conservative based on the following points: • The rate of outsourcing over the last few years. • The experience of outsourcing in manufacturing. ... This outsourcing of jobs could result either in net job loss in some occupations or in a slower pace of job expansion than would otherwise occur (Dodd, 2000).