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Offshore Outsourcing

By janegirl Dec 11, 2010 772 Words
Laudon and Laudon (2007) stated, “If a firm does not want to use its internal resources to build or operate information systems, it can outsource the work to an external organization that specializes in providing these services” (p. 505). Many companies utilize offshore outsourcing to cut costs. “Based on this misconception, many companies have explored the opportunities in emerging countries, where inexpensive skilled labor might give rise to cost savings and productivity.” (Modarress & Ansari, 2007, p.165) Offshore Outsourcing Ethical Dilemmas

Offshore outsourcing can create an ethical dilemma. The dilemma is that because many companies utilize offshore outsourcing that it limits the availability of jobs for the home team. There are well-qualified individuals in the same country that companies operate that utilize offshore outsourcing. Many times these individuals are overlooked. They are being overlooked because outsourcing offshore offers a very low cost. If it saves money then any company will be interested in these types of outsourcing. It is unethical because the companies are not offering these job opportunities to the qualified individuals where they operate. As citizens of one country lose their jobs to another country, it raises concerns. Will it be more beneficial to keep the jobs in the home country or reflect large unemployment numbers and higher production costs? This creates an unbalance in feelings towards offshore outsourcing amongst individuals versus companies. Pellet (2007) stated, A confluence of factors is driving this trend, In a world where great ideas are quickly assimilated across global markets, continual innovation is crucial to competitive success” (p.37). Overall, the unethical dilemma of offshore outsourcing is it eliminates jobs that would normally be beneficial to qualified individuals of the country in which the companies operate. Restricting Offshore Outsourcing

Restricting offshore outsourcing really depends on the company. “There is practically no limit to the types of white-collar jobs that can be shifted, as long as the work can be done via the Web and telephone” (Hamm, 2007, p. 68). Some jobs are not meant to be offshore. Scott (2009) outlined that in order to benefit from offshore outsourcing companies will need to take into account the level of interaction, stability of requirements, cultural (national) compatibility, need for flexibility, experience, overriding constraints, and TUPE. Taking all these items into consideration companies will be able to identify whether or not to utilize offshore outsourcing. Restrictions should be applied to those companies that do not necessarily have a service that needs offshore outsourcing. Many are utilizing offshore outsourcing to stay competitive with their rivalries. On the other hand, if restrictions were placed on all offshore outsourcing then the United States would not survive. Thornton (2004) stated: “Our economy is the number-one beneficiary of open trade and technology – 5% of American workers are employed by foreign companies. Any attempt to curtail outsourcing would harm the economy directly and further push us toward a disastrous protectionist trade war”.

Therefore placing restrictions on offshore outsourcing is not a wise decision.

Outsourcing Creating New Jobs
By continuing outsourcing offshore, this provides a possibility of new job creations in the United States. Thornton (2004) stated, “The ability to outsource work to other countries is crucial for both new job creation and saving current American jobs from foreign competition.” New jobs are created when one company outsources offshore and then back to the home headquarters. For example, Korea outsources its automobile production to the United States. Although outsource in the United States they also still maintain the design and efficiency of their automobile in Korea. This created new jobs for the U.S. while allowing Korea to cut costs. The back and forth availability of outsourcing helps generate new jobs on either side. As long as there is the opportunity to outsource onshore or offshore, jobs will continue to be created. WIPRO

WIPRO, one of India’s largest outsourcing firms has shown growth within the last year. Revenues increased by $55, 867 million dollar, which almost doubled the profit they earned from 2008. During the 2009 fiscal year WIPRO incurred more expenses but gained more sales. In the next five years, the limitation on WIPRO’s growth is as long as companies continue to utilize offshore outsourcing services, then it will continue to gain. On the other hand, if there is a slow down in offshore outsourcing then WIPRO will start to see steady to low growth.

Does offshore outsourcing pose an ethical dilemma? Yes and No. With more and more companies utilizing offshore outsourcing, the jobs are becoming extinct for onshore individuals. On the other hand, it is very beneficial to maintain offshore outsourcing to maintain trade.

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