Outsourcing - Reducing Costs by Transferring of Work to Outside Suppliers - Essay Example

?Insert Introduction Outsourcing, at times referred to as off shoring, is a common practice by different companies in attemptsto reduce costs by transferring portions of work to outside suppliers rather than completing it internally. Basically entails the reallocation of menial/ labor-oriented jobs, often those related with IT, legal work, content development, web design and maintenance, logistics, recruitment technical/ customer support and manufacturing to another country while administrative operations remain centralized in the mother country, in this case, the U.S. According to Bardhan and Dwight, several factors can endear a company to outsource its business operations. Off shore labor laws, wage laws and tax laws favor the idea of outsourcing as there is almost a certainty of maximizing profits through low cost labor. Workers abroad are often willing to work longer hours for less pay than those in the United States where there could also be a lack of expertise in certain areas of business process. In addition to this, the company is offered a great diversity of skill and kept abreast with emerging technology from various ends of the globe that go a long way in improving service delivery and quality of service. Further still, the company that off shores acquires global status and recognition in the world market which is a huge plus in its operations. This in addition to the fact that off shoring some business operations actually enables a company to shift focus to other crucial areas of the business is of unparallel value to the company growth and development (Bardhan and Dwight, 22). However endearing these advantages of outsourcing may be, several negative implications and concerns also lie in wait, both to the company and the United States economy. The good that may result from the endeavors of outsourcing almost always serves the interest of the top brass of the company only. Little or nothing at all of the entire benefits actually trickles down to the middle level workers or the public in general. Quality concerns arise as a result of outsourcing. As long as the outsourcing contracts are honored, the outsourcing company may tend to be motivated by profit to decrease expenses and condone shoddy work. The employees of the company may not also have the loyalty to the business, a trait that is often priceless in ensuring success of the operations. Workers may change jobs or move to greener pastures whenever they please or sense danger leaving the company in turmoil and incurring further costs as such with hiring and recruitment as cited by Cromie (54). There are also numerous hidden costs that arise from off shoring business functions. For instance, the process requires the hiring of a lawyer(s) and signing of contracts. Major budgetary loopholes appear for exploitation to the detriment of the company and anything not covered in the contract will be basis for the company to pay the additional charges. Other regulations regarding this exploit also seem to secretly add to costs of operations. Failure to pay wages strictly as stipulated can result in several implications like fines, back pay awards or even disqualification from filing any further H1B1 visa petitions for future workers. There is the risk of a company exposing some of its important and confidential operation information to third parties as a result of off shoring. This may render the company weak in the face of any arising or already established competition. The company also loses management control of outsourced business functions leaving several critical decision makings out of their hands. Some of these outside decisions may at times lead to bankruptcy. Language barrier and other cultural issues often come to play a negative role during outsourcing, majorly resulting in breakdowns in communication and even rejection of certain company products and services on cultural and religious grounds. Other problems include inappropriate categorization of responsibilities causing mayhem and a complete eyesore (Bergsten, 49). In general, as rightly stated by Ronald Pollina in, outsourcing is a major impediment to the growth and successful management of the economy and the middle class in particular. Loss of jobs or the lack of it therefore, has led to great economic strain and increased competition for available jobs. Many previous middle income workers have since lost their jobs as a result of off shoring of these businesses. With increase in technological knowhow and means to do faster, cheaper business, as a result of outsourcing, even more jobs are lost. In addition to this, outsourcing has greatly reduced the pool from which students and upcoming shapers of the economy can choose their future careers and professions from, dealing them a huge psychological blow too. As the local population is ignored, even the best minds that can improve the situations of the land if given opportunity are eventually lost as they seek greener pastures. This results to brain drain of local talent and the eventual loss of the middle class (Pollina, 75). Even so, the moneys from the companies end up going back to foreign countries. This severely hurts the purchasing power and market demand. Middle income set ups eventually finds it a near impossibility to survive these conditions and they collapse in despair. With levels of unemployment soaring as a result of outsourcing, social problems begin to increase with crimes ranging from robbery, shop lifting, drug and substance abuse to general destruction of property and businesses. Middle income entrepreneurs that cannot provide security to their budding businesses due to insufficient capital are left reeling as a result of these evils perpetrated by outsourcing. The youth in particular, are left hopelessly and dangerously jobless with nowhere to turn. This also leads to bad publicity and ill will from the public for those companies that off shore their business functions; reducing profit and gain in the long run (Pollina, 84). It is indeed a plain fact, that needs no debate really, that returning jobs back to the land would go a long way in resuscitating the middle class and providing the much needed job security for the workers. According to recently conducted survey, in one California County, outsourcing of just about 2000 jobs to Europe Asia and Latin America will result in economic losses of over 949 million USD annually, of which 301 million represents lost wages mostly of the middle income earners. As a result of these growing and clearly evident concerns, President Obama promoted an act “Bring Jobs Home Act” that would offer incentives like tax reductions or a 20% tax credit for moving operations back to the U.S.A. In 2011, General Electric CEO Jeffery Immelt, a close Obama advisor, told Wall Street Journal that 46% of GE’s business was overseas compared to the previous year’s 30%, highlighting a frighteningly growing trend into outsourcing. For the sake of the economy and the middle income class in particular who depend on these jobs, outsourcing must be stopped and jobs brought back home swiftly. These companies must put greed aside and give back to the society. It is the first and foremost duty of every citizen. Works Cited Bardhan, A. Deo, and Dwight M. Jaffee. Globalization and a high-tech economy: California, the United States, and beyond. Boston, Mass: Kluwer, 2004. Print. Bergsten, C. Fred. The United States and the World Economy: Foreign Economic Policy for the Next Decade. Washington, DC: Institute for International Economics, 2005. Print. Cromie, Jenny. Outsourcing. New York: McGraw-Hill, 2012. Print. Pollina, Ronald R. Selling Out A Superpower: Where The US Economy Went Wrong And How We Can Turn It Around. Amherst, N.Y.: Prometheus Books, 2010. Print. Top of Form Bottom of Form Read More