Outsourcing in America Essay Example for Free

Outsourcing in America Essay 1. Introduction In business, in order to provide services or sell products at competitive rate, corporations are to cut unnecessary costs or to focus on core competences in order to reduce the number of human resources and associated costs. Concerning the need to reduce costs coupled with the fierce competition in business, currently, enterprises are striving for finding the best solutions to increase revenue while keeping costs as low as possible. While the matured technology can help enterprises to reach economy of scale, outsourcing of employees (human resources) can be the savior for companies to keep their fixed costs that incurred from employment and research to reach minimum level. Fortunately, in the Internet era where any documentations process can be sent out over the internet and job can be conducted via e-mail or instant messaging, outsourcing-typed employment model have proved to promote significant savings. Concerning the issue, this paper discusses benefits and impacts of outsourcing in the U.S. 2. Outsourcing Government Accountability Office (GAO) says that â€Å"Outsourcing† of services refers to an organization’s purchase from other countries of services that it previously produced or purchased domestically, such as software programming or telephone call center (US Embassy, 2004). Just like other business schemes, outsourcing also gives us advantages and disadvantages as following: 2.1. Advantages of Outsourcing to U.S. Economy In the U.S., the cost of labor has increased significantly. The situation has driven American enterprises, especially ones in information technology segments, to outsource the software development to a developing country like India. The reasons are obvious that the labor cost in India is much cheaper. It makes sense since in today’s economy, companies need to maintain a cost structure that is globally competitive; given that requirement, we can easily guess how businesses will react. Ultimately, free market competition is the ruler of the day, and, while governments may introduce barriers that influence individual situations, there will be no stopping the offshore outsourcing trend. Moreover, McKinsey Co predicts that the Internet-enabled services (ITES) market is likely to touch $142 billion in 2009. There would be a net saving accounting for $390 billion from current cost of $532 billion for these services (Kurian, 2003). U.S. can fulfill the net saving through off shoring to other country like India. 3. Impacts of Outsourcing While such incredible saving might be the concerns of American enterprises, Nasscom quoted Michel Janssen, founder and President, Everest Group, that there is possibility that outsourcing have closed relation to the loss of jobs in the US. Some private researchers predict that outsourcing may eliminate 100,000 to 500,000 IT (information technology) jobs within the next few years, while others note that outsourcing can also generate benefits, such as lower prices, productivity improvements, and overall economic growth. Concerning the situation, Jackson (2005) sees that the outsourcing may lead to increasing import to the U.S. This makes sense while foreign investment is displacing jobs and domestic production, there are possibilities that foreign affiliates increase imports to U.S. parent company. In addition, media and the public reveal that outsourcing leads to worse services or products. With the increasing trend to use outsourcing in some of the core functions of a company (like customer service and hospital staffs), reports about inferior quality caused by outsourcing agreement are growing in number (Dookril, 2004).