Is Outsourcing a Wise
YES: BusinessWeek, from “The Future of Outsourcing,” Business- Week Special Report: Outsourcing ( January 30, 2006), http://www .businessweek.com/magazine/content/06_05/b3969401.htm
NO: Ephraim Schwartz, from “Painful Lessons from IT Outsourcing Gone Bad,” InfoWorld.com (August 25, 2008), http://www.infoworld .com/d/adventures-in-it/painful-lessons-it-outsourcing-gone-bad-032 ISSUE SUMMARY
YES: BusinessWeek writers argue that outsourcing is likely to become even more important to corporate America in the near future. Indeed, they suggest that it has the potential to transform whole industries. NO: InfoWorld columnist Ephraim Schwartz explores the oftenoverlooked costs associated with failed outsourcing initiatives. His
analysis consists of four brief case studies of outsourcing initiatives that turned out badly.
Based on the past two presidential elections, it would appear that one of the most contentious issues in American society is the outsourcing question. In 2004, the Democratic nominee, John Kerry, repeatedly expressed his disdain for US fi rms that “sent jobs overseas” and promised, if elected, to punish those businesses that engaged in outsourcing. In 2008, while on the campaign trail, then-Democratic presidential nominee Barack Obama said, “Unlike John McCain, I will stop giving tax breaks to corporations that ship jobs overseas, and I will start giving them to companies that create good jobs right here in America.” (Dan T. Griswold, “Shipping Jobs Overseas or Reaching New Customers? Why Congress Should Not Tax Reinvested Earnings Abroad,” Center for Trade Policy Studies, Free Trade Bulletin, January 13, 2009; http://www.freetrade.org/node/926). And speaking in front of a joint session of Congress on February 24, 2009, President Obama made this statement: “We will restore a sense of fairness and balance to our tax code by fi nally ending the tax breaks for corporations that ship our jobs overseas.” (Daniel Ikenson, “The Outsourcing Canard,” Cato at Liberty.org, February 25, 2009; http://www.catoat- liberty.org/2009/02/25/the-outsourcing-canard/).
Part of the reason this topic is so controversial is because it overlaps with several other contentious issues. Some critics claim that outsourcing encourages 86 Quantitative Foundations and Business Applications
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III. Strategic Management 11. Is Outsourcing a Wise
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the development of sweatshops in Third World countries (see Issue 2 in this text). On the other hand, supporters often claim that increased competition from globalization virtually requires outsourcing as a business strategy (see Issue 17). And depending on which side of the protectionism issue is being considered, outsourcing is presented as either pro- or anti-American (see Issue 18). Given the antagonism toward outsourcing that exists in the minds of many, one might reasonably question whether outsourcing is a wise course of action for a fi rm to follow. Proponents of outsourcing have strong points on their side of the issue. The call to end outsourcing is, in their view, merely protectionism in disguise, a concept entirely at odds with traditional American political and economic principles. American capitalism and prosperity were built on free trade; forcing American fi rms to forego cheap overseas labor in the name of patriotism will ultimately cause US fi rms, and society, to suffer. In terms of the exploitation of foreign labor argument, supporters respond that it is not exploitation at all. According to Edwin Locke, Dean’s Professor of Leadership and Motivation at the University of Maryland and a contributing author to the Ayn Rand Institute, an infl uential think tank: . . . the claim that multinational companies [e.g., American fi rms] exploit workers in poor countries by paying lower wages than they would pay in...
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