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Is Outsourcing Good for America - Essay Example

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Your Name: Class: Is Outsourcing Good for America? When President Bush’s chief economic adviser, Dr. Gregory Mankiw was asked by a reporter as to whether outsourcing was good or bad, he replied “Yes, it is probably good for America in the long run “ (Hira 2)…
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Is Outsourcing Good for America
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Download file to see previous pages As Konig & Koskela elaborates “Over the last years, as a result of the growing globalization, international outsourcing, which is defined as the acquisition of production parts from an independent foreign supplier, has become an important managerial tool in reorganizing a firm’s production process (22). Outsourcing as a managerial tool however is not a new or a radical business practice concept. Offshoring, a specific subset of outsourcing, involves the practice of moving noncore operations overseas, either by transferring jobs to a foreign subcontractor or building a facility where labor is cheap (Burkholder 2). It is only recent that outsourcing became pervasive as precipitated by the advances in information technology, integration of economy and the necessity for businesses to keep up with competition. As further elaborated by Burkholder, Private industry and the federal government have numerous reasons for outsourcing. Based on a survey by the General Services Administration in February 1998, “Outsourcing Information Technology,” the following are the primary reasons, in descending order of importance, for outsourcing information systems: Focus in-house resources on core functions. Allow personnel cost savings. Improve quality of information systems services. Increase flexibility (9). And this pervasiveness in resorting to outsourcing has changed the way business is done. Now, some early adopters are figuring out how to tap overseas workers for personal tasks. They're turning to a vast talent pool in India, China, Bangladesh and elsewhere for jobs ranging from landscape architecture to kitchen remodeling and math tutoring. They're also outsourcing some surprisingly small jobs, including getting a dress designed, creating address labels for wedding invitations or finding a good deal on a hotel room, for example (http://online.wsj.com). Given the scope and scale that outsourcing is being practiced today, it is no longer a surprise that this has caused anxiety among workers of host countries of a possible displacement from their jobs. Those workers' fears however have some grounding in fact. The prime motive of most corporate bean counters jumping on the offshoring bandwagon has been to take advantage of such "labor arbitrage" -- the huge wage gap between industrialized and developing nations. And without doubt, big layoffs often accompany big outsourcing deals (http://www.businessweek.com). Business as an entity is still profit driven and will always look for ways for it have a competitive edge against competitor to maintain profitability and increase the value for its shareholders. As always, it will always be motivated on cutting cost to maximize profitability. Such, outsourcing is just one of its strategy to keep up with competition and maintain its profitability in the market. For sure jobs will be in danger. With wages in developing countries like India and China which is only 10 to 20% compared to US salary, the incentive for companies to outsource is just very hard to resist especially when there seems to be an endless supply of educated and underemployed workers (Hira 3) who can equally perform a US based job. The IT industry, which was once one of the highest paid jobs, is estimated by the experts of the University of California to be in danger of being outsourced. And nothing can ...Download file to see next pagesRead More
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