History and Background of Outsourcing - Essay Example

. Even though America and European countries are highly developed regions compared to the countries in the other parts of the world, these regions are facing immense manpower shortage in critical employment sectors. For example, in construction industry and healthcare industry, majority of the people working in these regions are from Asian countries. In other words, opportunities are more compared to the number of available manpower resources in developing countries. Thus, manpower cost is highly expensive in developed countries whereas in developing or underdeveloped countries manpower resources are more and hence the labor cost is cheap.

For example, heavily populated countries such as India and China have surplus manpower resources whereas employment opportunities are less in these countries. Out sourcing helps developed countries to exploit the abundant cheap manpower resources in heavily populated countries so that they can reduce the prices of their commodities and compete effectively in international market. This paper analyses the history and background of outsourcing. History and background of outsourcing The evolution of Outsourcing can be attributed to globalization and liberalization. . Keeping these points in mind, these countries developed and introduced the globalization policies.

Even though countries like China watched these polices with suspicion, they also realised the opportunities quickly and embraced globalization. As industries grown, organizations started to look for opportunities in international market. Domestic markets were insufficient for some of the major organizations to sell their products during the second half of the twentieth century. Such organizations started to explore opportunities outside the domestic market and as a result of that competition started to increase in international market.

Along with opportunities, these organizations faced lot of challenges also in international market. Some organizations were able to reduce the prices of their products considerably of the availability of cheap labour in their home country. For example, Chinese products are still causing major worries to international companies because of its cheaper prices. This is because of the fact that China has plenty of manpower resources and their labour cost is comparatively low. In the 1990s, as organizations began to focus more on cost-saving measures, they started to outsource those functions necessary to run a company but not related specifically to the core business.

Managers contracted with emerging service companies to deliver accounting, human resources, data processing, internal mail distribution, security, plant maintenance, and the like as a matter of “good housekeeping”. Outsourcing components to affect cost savings in key functions is yet another stage as managers seek to improve their finances (Handfield, Ph.D, 2006) Even though the business process