Offshore outsourcing

Sunday, June 05, 2005

Outsourcing is not a new issue although offshore outsourcing is new comparatively. Everybody outsources something and something ranging from house cleaning to high-tech jobs. For the last many years, software development and technical support jobs were outsourced to developing countries where the cost of labor is very low compare to developed countries. Recently this has moved to lesser technical functions like call centers, insurance claims, and accounting and tax return management.

Every company is going for cost-cutting nowadays. To reduce costs, US companies get a temporary work visa for software developers and import them to the US. That software development person learns specific needs, working, and requirements of the company that has managed a temporary visa for him. After that, he returns back home and establishes the IT department for that firm in his home country. Once, this offshore IT department is operational, the colleagues who trained people are replaced. India is one of the biggest beneficiaries of offshore outsourcing wave. It has good universities, low cost highly educated and English speaking people. India is second next to the US when it comes to the total count of the English speaking population. Other countries like Ireland and the Philippines are beneficiary and bigger countries like China and Russia are emerging in the market of offshore software development. Workers in the Philippines are offering a broad range of business services like customer call center/helpdesk, accounting, reviewing insurance claims, and processing bills.

Till now outsourcing was just hiring outside firm to handle some specific or technical tasks which are not considered a core competency for the business. Like a health Care Company outsource software development so that they can focus on their business more than internal software development. But this scenario changed with the evolvement of the internet. It has brought the world very close. A person sitting on another side of the globe can work on software development without hassles and send/manage his work online. This changed outsourcing to offshore outsourcing.

The businessman says offshore outsourcing is nothing but a new trend of cost-saving. It is beneficial for the American economy in the long run. Because companies can spend more money on core technology and R&D. Companies can do more savings and can invest more in cutting edge technology which can generate new high paying white-collar jobs. On the other hand, labor advocates counter this offshore outsourcing with the argument that, offshore outsourcing is threatening US living standards by forcing those who lost jobs to overseas software developers by undertaking low wage jobs. In addition, this argument of offshore outsourcing was one of the big issues in the last presidential election.

In the US, companies do not require to report their offshore outsourcing practice to any governmental institute. So, the estimation of job loss varies widely. Some reports say it is 300,000 of the total 2.4 million jobs lost in the year of 2001. That’s why one expert mentioned offshore outsourcing that, even though the economy is on recovery, it has not generated enough jobs. Supports of offshore outsourcing say, its a reflection of how the US economy is evolving and in this phase, bumps in the road are expected. They say an attempt to block the hiring of foreign workers will hurt the economy and American workers. America can lose its edge in cutting edge technology. On the other hand, offshore outsourcing allows global workforce which serve clients round the close apart from cutting labor cost. And according to British information firm Data monitor, only 2% of the total call centers are working outside of the parent company’s territory.

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