Offshore Outsourcing of Information Technologies Services

Topics: Outsourcing, Economy, Offshoring Pages: 9 (2664 words) Published: June 28, 2005





Offshore outsourcing is not a new practice in the United States. Offshore outsourcing of information technologies services, however, is relatively new to our nation. It is a hot issue in political debates, with this being an election year. Job loss and job creation in the United States is on the platforms of leading candidates. Economists are projecting that the offshore outsourcing of certain types of jobs will in fact create jobs here at home, ultimately benefiting the labor force and our economy. While there is not significant statistical data yet to support this theory, if one looks to the history of outsourcing as a whole, it does not seem an impossibility. But why are we outsourcing these jobs? What are the factors that have brought us to this place in the labor market? What caused employers to look to other countries for employees?

The purpose of this short study is to consider these questions and provide some thoughts as to where we are now, how we got here, and where we are headed with offshore outsourcing of information technology jobs.

The History of Outsourcing

Outsourcing is the process of subcontracting services and operations to other firms that can provide them more cheaply or better . Companies outsource tasks, projects, and sometimes even entire operations. Offshore outsourcing, then, would be outsourcing to firms in other countries. This practice is not new, just as the loss of jobs here in the Untied States to other countries is not new. The automobile industry and the steel production industry were hit by outsourcing long ago , as factories were built in other countries and manufacturers hired workers at lower wages to produce parts and products. And even before this, workers actually lost "skilled jobs to low-wage foreign competition" as long ago as the Industrial Revolution . In the 1800s British skilled weavers were protected by the government with bans on the use of the textile machinery , but only temporarily as the machines proved to be five times more efficient; Indian cloth makers in the 1830s lost out to British textile workers ; in 1892 Andrew Carnegie's efforts to automate steel production resulted in the infamous Homestead strike of 1892 . Outsourcing was not the only way low-wage foreign workers affected the work force in the 1800s. There were also millions of immigrants added to the workforce. When that many new workers were added to the labor force, of course it was not without effect on industrial wages—they were driven down. Both outsourcing and immigration affected the economy in more ways than just the cost of labor. Products were manufactured at a lower cost and thus sold for a lower price. Lower manufacturing costs benefited the companies, and the lower prices of the goods produced benefited consumers. Outsourcing Today—Offshore Outsourcing

How is it Possible?

According to Philip Kotler, "Today's economic landscape is being shaped by two powerful forces-- technology and globalization." Offshore outsourcing is made possible by these same two factors. This is not surprising, given the history of technological advances' effects on the economy. Advances in communications technologies and information technologies are making it possible. Several jobs can be performed at one place while reporting to another, by electronically sending the work wherever it is needed. And offshore outsourcing is having a tremendous affect on the economies of the countries involved.

The transportation revolution in the late 1900s was driven by technology, and it completely changed the way goods were transported from place to place. Trains and steamboats made it possible...

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