Outsourcing Economic Failure

In general, the outsourcing is hiring the foreign workers/company to do a particular task, as opposed to hiring domestic workers/company. Besides the outsourcing, the international purchase is an essential activity of companies. In the trend of a booming global economy, a company only focuses on its core value and hire suppliers to supply the necessary product and service. The relationship between companies are complicated and interdependent.

Specifically, companies are transferring these services overseas as in the case of call and help center services or companies are ordering manufacturing supplies from overseas at a much cheaper price than they could obtain them inside the U.S. Outsourcing is a term that is often used interchangeably with off shoring (Bhagwati, Panagariya, & Srinivasan, 2004).

“Outsourcing refers to the practice of contracting workers outside of a company or business for work duties or services previously performed by company employees or “in-house”. This practice is also often referred to as offshoring due to the increasingly prevalent use of “non-U.S.” service providers for these outsourced duties. However, strictly speaking, outsourcing can and does refer to the use of contracted labor provided by individuals outside of an organization, but still within the U.S.; whereas when these same services are provided outside the U.S., it is both outsourcing and offshoring.”

The dawn of the outsourcing era. Many large U.S. corporations cultivates outsourcing faster than we can imagine. The trend that began in the late 1970 and picked up speed in the 1900s with the opening trade with China, India, and Eastern Europe (“Outsourcing: What’s the true Impact”). In its broadest sense, outsourcing is simply contracting out functions that had been done in-house—a longtime U.S. practice (“Globalization: Threat or Opportunity”). Subsequently, outsourcing is an essential part of globalization; and it is the combination of markets through the cooperation of internalization, federal, and state governments with corporate companies to produce products on a reduce production cost, and offer services on lower labor cost. When a U.S. manufacture product, and buys material from an intermediate supplier from out of the country rather than producing them in-house, that is what is called outsourcing. Also, when U.S. corporation hires outside contractor out-of-the-country to do U.S. call center services for less labor cost that is outsourcing. When a company deals out its operational task, such as payroll, accounting, and software operations that is outsourcing. Obviously, all of these examples seem to benefit and in favor of the corporations. To get the clear understanding of outsourcing for major corporation perspective, I have interviewed IKEA’s U.S. Deputy Retail Country Manager Rob Olson about outsourcing—Swedish

Outsourcing is a method used by many corporations in which their products are manufactured in foreign countries often for cheaper labor.This method method of productions has it’s pros and cons.

Outsourcing is the process of “hiring foreign workers to do a particular task, as opposed to hiring indigenous workers” (fee.org). Although it may seem like a favorable business approach, it only provides a gain out to large corporations. Since outsourcing is assembled around extensive cooperation’s, it steals from the “mom&pap” stores.

According to a report by Working America, “Manufacturing employment collapsed from a high of 19.5 million workers in June 1979 to 11.5 million workers in December 2009, a drop of 8 million workers over 30 years.”

“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement" (Amadeo). At its 1950s zenith, the American Dream included suburban bungalows, stay-at-home moms, and a middle-class life for the common man. But, the squeaky cleanness stopped at the workplace door. Grimy hands were the reality behind the reverie. Manufacturing jobs and heavy industry were the heart of America’s mid-twentieth-century prosperity, giving immense opportunity to those of abundant resources or power to create a capital-intensive production corporations, that many Americans could never fathom owning, and would ultimately work

Outsourcing is when a company purchases products or services from an outside supplier rather than performing the same work within its own facilities, in order to cut costs. In other words, outsourcing is an organization's contractual relationship with a specialized outside service provider for work traditionally done internally by that organization. The decision to outsource is a major strategic one for most companies because it involves weighing the potential cost saving against the consequences of a loss in control over the product or service. Some common examples of outsourcing include manufacturing of components, computer programming services, tax compliance and other accounting functions, as well as payroll and other

“Outsourcing has become a controversial practice in the United States because many jobs have moved overseas where those tasks can be accomplished for lower cost” (Ferrell & others 2014). When businesses seek to move jobs away from the United States and into less expensive areas, they are in fact not only affecting small businesses, but they are also contributing to the unemployment population. I say this because over the year’s unemployment has risen and more and more companies are seeking the cheapest method to produce their goods. Initially the expansion to outside countries had good intentions, it has somehow exploded and increased in popularity amongst large corporations.

I would agree with the special report when it says that outsourcing and offshoring are not threats to the US. However, I do think that there are disadvantages to outsourcing and offshoring. Outsourcing and offshoring were originally made for countries to save money in production and labor costs; now places like China and India, the counties that US companies were offshoring too for cheap labor aren’t as cheap anymore. The special report examines some of the disadvantages of outsourcing and offshoring. These disadvantages include: high shipping costs, long transportation time, weakening innovation, and supply chain risks. The biggest known threat that comes hand in hand with outsourcing and offshoring is loss of jobs. But, I don’t think that

In 1989, outsourcing was formally identified as a business strategy that would increase a company’s markets and profits. The idea of outsourcing involves subcontracting manufacturing jobs such as IT and engineering design to foreign companies. Even though the term outsourcing has been recently introduced, the concept has been around for quite some time now. Outsourcing had promised to create more jobs and a better life for Americans. In reality, outsourcing, despite insourcing, has hurt far more American job holders and job seekers than they have helped. Instead of creating more jobs for Americans, it has created more jobs for non-Americans and left many unemployed. Only a few people have benefited from outsourcing: company executives, shareholders, and consulting firms.

“Did you hear the news? No, what happened? We are shipping all of the IT jobs to India …” Water cooler conversations are beginning to sound more and more like this. Outsourcing of jobs has become a major concern for employees at large corporations (technical or financial). The economic drought that the United States faced in 2000 to late 2001 led to numerous cost-cutting measures, but none more effective than that of outsourcing. The outsourcing of jobs is now a necessity in the United States, so companies are forced to send jobs to places such as India to keep costs down, all the while trying to balance the advantages and disadvantages of the move.

Outsourcing refers to hiring an outside, independent firm to perform a business function that internal employees might otherwise perform. Many organizations outsource jobs to specialized service companies, which frequently operate abroad. The outsourcing trend stands to continue; the latest wave of outsourcing impacts the information technology field. IT outsourcing includes data center operations, desktop and help desk support, software development, e-commerce outsourcing, software applications services, network operations and disaster recovery.2

Offshoring is the practice of relocating business processes to lower cost locations outside the country of origin. This is not a new practice for companies in the United States. Moving business processes to another country to take advantages of lower operating costs and cheap labor seems like a great idea. However, the dilemma for a company is whether the benefits of offshoring outweigh the risks. This dissertation will begin by briefly reviewing the history of offshoring. Next, it will examine the various advantages and disadvantages associated with offshoring. Thirdly, it will explore the growing trends of backshoring and nearshoring in situations where