Offshore Outsourcing : An All Win Premise

The advent of internet, globalization, free marketing, and liberalization has turned the world into a small global village consequently destroying all trade barriers. The awareness that outsourcing can boost productivity sans forfeit of class has impelled MNC’s, in all segments, to endorse this loom. A good number of major IT companies do most of their business overseas and obviously want to have some of their employees in those markets. Lower wages in some countries are also a huge incentive to move operations, especially since high-speed communication removes many of the barriers to dealing with U.S.-based colleagues and customers. Therefore, numerous MNCs in USA, Europe, Australia, and Japan have initiated IPOs (International Procurement Organizations) in developing third world countries particlulary India, China, Mexico and Brazil.

Offshore Outsourcing ensues largely in the IT sector, followed by medical transcription and other health care-related jobs, automotive spares/components, engineering segment, and business processing, accounting, advertising, , Human Resource Management and Development, , financial investment and consultancy, legal services, and network security.

The Statistics

But Offshore Outsourcing nonetheless has also truncated millions of job opportunities in the respective home countries. Over 2.2 million people in the US alone lost their jobs in the preceding four years.

US Senate is contemplating to ban Offshore Outsourcing of government contracts. This posits an ironic premise US, in theory, stalwartly campaigns for global acceptance of free trade practices, but in practice it mulls over legal restraints to offshore outsourcing from foreign lands. But the recoil may be puffed up. One of the hottest studies designates that the trend may actually be creating more jobs.

In the past decade, US companies single-handedly have devoted $7 billion in their ancillary operations in India, garnering a profit in excess of $26 billion. Telstra, an Australian telecom company, for instance, accumulated more than $75 million a year by outsourcing several assignments to Indian ventures proving an apparent clue that, notwithstanding separated outlooks in the US, Britain, France, Germany, and other first world countries, corporate administrations will persist favoring offshore outsourcing. On the employment side, there are two standpoints: first, deeming that outsourcing creates massive joblessness; and, second, contrariwise. Indeed, as pointed out in a report by the US Chamber of Commerce, the main reason of increased unemployment in the US, Britain and other developed countries is the augmentation in yield due to continuing advancements in technology. Quoting the instance of GM (General Motors) in USA three decades ago the report says that it used to engage larger than 4,50,000 workers to produce five million automobiles / year, and now it utilizes under 1,18,000 hands to manufacture the same number of vehicles. This reduction is attributable to the advancement of designing, mechanization, assembling and testing gizmology together with robotics.

An All Winning Premise

The theory of outsourcing is also technology- motivated anchored in the principle that one must outsource low-tech data entry jobs requiring more of manual labour and focus on central activities, exploration and advance of innovative gizmologies. While the proceeds generated from Offshoring be utilized for further expansion and technology innovation and specialization thus engendering fresh and superior employment openings.

An account primed by McKinsey Global Institute for the US Chamber of Commerce has avowed that: "A US company earns on an average a net profit of $1.12 to $1.14 by outsourcing work for which it pays $1.0 abroad." It additionally acknowledged that by offshoring low paid jobs abroad, US capital, fiscal or intellectual, can be exploiedt to spawn more lucrative and superior revenue generating jobs. The report also affirmed that by outsourcing assignments to India and other developing countries, many US / European companies are also establishing new markets in such countries. Call centers so grounded in India or other developing countries are being fundamentally outfitted with US or European gizmos like Compaq / HP Computers, Microsoft software, Lucent phones and Carrier air conditioners.

A Stalemate Position

But if the US senate puts a ban on Offshore Outsourcing or impedes it in any way then the US will then have to depend on costlier personnel even for low-tech data entry jobs jobs. Consequently, wares made in US factories will become dearer as compared to the global market and therefore in competitive, which shall yet again pressurize US corporations enormously of closure or diminution in output; resulting still in job loss for many.