For quite a long time now, ‘OUTSOURCING’ has
become a buzzword in both the international and
local economy because of its business application
in both the corporations and for the small
businesses and because of its political
applications as well. And here are some of the
new words you might encounter that may hinder you
from comprehending with matters concerning
outsourcing when you encounter these if ever. In
addition, here is also included some details
regarding outsourcing including its roots, its
current relation with the politics.
First, let’s define ‘Outsourcing’…
Outsourcing is the act of obtaining services from
an external firm. It is a service commonly
offered by outsourcing companies which has
expertise in certain fields such as
telemarketing, accounting and business process
outsourcing. It is beneficial for companies who
seek to break down or lessen their expenses and
to use their resources to focus on the field of
their expertise.
Now, let’s trace how outsourcing began…
The concept of outsourcing was popularized by
Ross Perot when they founded Electronic Data
System (EDS) back in 1962. . EDS would say to a
potential client, "You are good at designing and
manufacturing widgets, but we are skilled with
managing information technology. We will sell you
the IT services that you require, and you can pay
us periodically with a minimum commitment of two
years.” Today, EDS is a multi-billion dollar
company with over 70,000 employees and is only
one of many global BPO firms.
Offshore outsourcing…
Offshore outsourcing, or “offshoring”, refers to
outsourcing to firms in foreign countries, often
to take advantage of labor arbitrage. In the past
10 years, business process outsourcing contracts
have increasingly been given to firms in
developing countries. Typically educated workers
in developing countries, such as India or China,
work for a much lower wage than do similarly
educated workers in developed countries, such as
Japan.
Savings from the lower wage rate must
exceed the increased costs of management and risk
associated with offshore outsourcing for it to be
economically viable.
Offshoring and the Politics…
Offshore outsourcing has recently become a
hotly-debated issue in the national media. When
the American economy began to pull out of
recession in 2001, unemployment did not decrease
as expected. Offshore outsourcing was blamed as a
contributing factor to this “jobless recovery”.
Information Technology was a particularly soft
sector, and many American programmers lost their
jobs to lower-paid foreign counterparts. Many
economists however have recently conjectured that
the higher-than-expected unemployment numbers
were not the result of offshore outsourcing, and
that offshore outsourcing has actually had a
positive impact on the American economy.
Undoubtedly the debate will continue into the
presidential campaign.
Source: http://www.blogsource.org/2004/06/outsourcing_101.html
by the Outsourcing Times
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