Why Should Companies Based in the United States Outsource Parts of their Business to Off-Shore Locations - Research Paper Example

The nation’s international presence has not only facilitated the process of outsourcing for the companies in USA but also made them successful in the global market. There has been extensive debate on whether outsourcing is desirable or not and whether people are affected by it. There have been different views on it from people. The project explores the advantages that the US firms enjoy through outsourcing of activities. The advantages would be discussed in terms of the economic benefits brought about in the company in the long run.

Economic Benefits to the Company and the U.S. economy in the long term The US organizations are generally seen to outsource activities to countries like India and China and have attained considerable success in capitalizing in these markets. India is considered to have extensive technical expertise, which is one of the factors why the size of the outsourcing sector is huge in the country. This helps the US firms to exploit the core competencies of the developing nations and use them in the company’s advantage.

In addition to this among the outsourced countries, India also has a large pool of talent which has a strong command on the English language. This is accompanied with a strong base of technically skilled expertise (Whitfield & VanHorssen, 2008, p.2). Among the other key players in the field of outsourcing is Brazil, which provides a highly advanced technological infrastructure. Another option before the US companies is Russia which provides a huge pool of labor which is educated in the field of science.

Their labor is also known for their strong delivery and process methodology. The nation is one of the most competent in the area of research and development. It has immense support of the government to develop its software skills and expertise (Whitfield & VanHorssen, 2008, p.2). Extensive research was conducted which indicates that both the industrialized and developing nations in the world could reap the gains from outsourcing of services. This would essentially mean efficiency gains from the point of view of the industrial nations via the opportunity of developing skills and expertise in areas in which they have competencies.

According to the report presented by McKinsey Global Institute (2003), for every US $1, worth of outsourcing, USA gains $1.12 and the outsourced country gains $0.33 approximately. This fact shows the degree of gains that organizations can enjoy through the process of outsourcing. Most multinational companies have started outsourcing their service activities on a regular basis. This is done based on the ground that in case they do not outsource their services while their competitors continued to do so, they would lose the local and global markets to their foreign rivals.

This is because it is felt that if they don’t outsource while their competitors continue to do so aggressively, they would be losing on the local and global market to the foreign rivals. This would be likely to result in low and stagnant profits which would result in low creation of investment and capital in technologies. The advantage of saving costs from outsourcing accounts for the most important value source for the organizations in US (Rajan & Srivastava, 2007, p.40). Global outsourcing is particularly effective in attaining advantages for developing nations of the world.

There has been opening up of new employment opportunities, exports and growth of numerous of tradable services activities. Looking at a more dynamic picture, increase in the level of income by trade would simultaneously bring about creation of favorable feedback effects from the other