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.
by the Outsourcing Times
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