Outsourcing

Outsourcing

How many of you grow your own food, make your own clothes, or build your own cars? (Raise your hands, please) You don't, do you? Just as some of you might use an online service to find a date (you know who you are), many businesses also use outside sources in the areas that they are not competent in.

American companies that outsource jobs have the option of doing it either domestically (onshore) or overseas (offshore). The growing trend is to hire employees abroad. Firms find that it is cheaper to employ people offshore, and some companies even claim that such workers are better educated and provide friendlier service. The most popular country to outsource from is India. Just about all of the workers have college degrees and can handle more complex situations than U.S. employees with only a high school degree. Indian employees also excel at customer service, and since they enjoy their jobs the turnover is low.

Many U.S. companies are also taking a closer look at offshore outsourcing due to competition from other countries such as China and Thailand. These foreign countries are stealing customers with prices 60% below those of U.S. companies. Not only do they have cheaper labor, but their costs for raw materials are lower. If that wasn't enough, they also receive government subsidies. American companies are finding it extremely difficult to compete with this "Asian invasion".

While offshore outsourcing is mainly known to be used in the areas of customer service and information technology (IT), "any position where people do not need to work directly with clients is moving - financial analysts, accountants, medical research and other jobs." - Dennis Adams, chairman of the UH Bauer College of Business Dept. of Decisions and Information Sciences. Many of these IT jobs, however, are coming back to the U.S. When the dot.com bubble busted, UH students in the IT program changed their majors since it was not a hot job anymore. This forced companies to outsource overseas. Today, with the growing economy, the demand for IT is higher and students are reentering the program and finding jobs.

Opponents of offshore outsourcing claim that it has caused the U.S. unemployment rate to increase. In Ohio, 227,000 high-tech jobs were outsourced to countries that could perform at lower wages. For example, one computer manager who made $80,000 per year lost his job to an Indian worker who performed the job for under $10,000 per year. However, Americans need to realize that many jobs today, especially in customer service, are becoming automated; they would have lost their jobs regardless.

While many politicians are fighting to keep jobs in the U.S., economists are claiming that outsourcing will create more employment opportunities for U.S. workers in the long run. How is this? Well, it is believed that by allowing the firms to cut costs now their profits will skyrocket. Then, the firms will be in a better financial position to hire more U.S. employees. Will this really work, or will the stockholders of these companies decide to keep the cheap labor and reap the profits? What do you think?

Since September 11th, there has been a great concern with firm security and customer privacy. Therefore, companies are thinking twice about contracting work regarding sensitive data overseas. A majority of firms retain their human resource outsourcing onshore. A few examples include: 1) ADP (Automatic Data Processing) which processes 1/6th of employee paychecks in America, 2) Manpower, Inc. which screens two million workers per year for 400,000 firms, and 3) First Data Corporation which handles 400 million credit card accounts.

Firms need to take into account that the more complex services are, the more difficult it is to manage them abroad. Many companies are starting to realize that outsourcing offshore is not saving them as much money as they thought. Although it is still cheaper overseas, the demand for labor is causing wages