Outsourcing

Introduction

Outsourcing of American jobs overseas is displacing American's in the United States. American blue-collar workers and the Middle Class American will soon be a word of the past if the US government continues outsourcing the low-skill jobs overseas.

One of the concerns in regards to the outsourcing of jobs is that wages of American jobs versus the wages of the Chinese, Japanese, Indians and Philippians are much less. If these workers were using the same identical technology and having the same identical skills were paid the same wages, there would be no problem. (Greene, 2006) It's also believed that if the US continues to trade freely with the overseas countries then the powerful drag of their far lower wages will begin dragging down American's average wages. (Greene, 2006)

Economist has found that tax cuts offered to large manufactures have caused productivity to go up. The manufactures are actually given tax breaks to be able to purchase more machinery to do the jobs and therefore fewer laborers are needed, causing a large number of workers to be displaced. The tax act that was initiated by Bush administration for big businesses was the "bonus depreciation". Under this act the more the companies spend on equipment the less the tax they have to pay.

The American economic recovery is several years old but yet jobs and workers income have failed to recover as it has in the past. It is estimate that the outsourcing of jobs is swiftly moving up the chain to skilled and specialist workers. The question remains is anyone safe from outsourcing? (Business Week p.26)

Overview

What is Outsourcing?

Outsourcing is transferring services or operating functions that are traditionally performed internally to a third-party service provider and controlling the sourcing through contract and partnership management (Roberts, 2001). It is a concept that has evolved from a manufacturing perspective to a strategic perspective, which views the concept as a way for organizations to focus and be more competitive. The basic premise of outsourcing is that a specialist organization can perform a particular service more efficiently than can internal operations because a specialist organization has an inherent advantage in producing and delivering a service. Superior technology, management skills, or economies of scale may contribute to this perception. The type of sourcing relationship depends on whether a long-term or short-term need exists. To save funds used for benefits for regular employees, temporary workers are hired. In this case, the organization (outsourcer) provides all necessary resources except the workers, who are provided by the vendor. For long-term services, the vendor has full responsibility for delivering the service; the outsourcer provides only a liaison.

The Negative

As with so many global trends, there is significant disagreement over the implications of global competition in services for American prosperity and competitiveness. Many people are pessimistic about the impact of offshore outsourcing at a time when American workers are having more difficulty finding employment, since it creates personal hardships, reduces the tax base and increases demands on our safety nets. Competitors from lower-wage nations, it is feared, could put downward pressure on profit margins and salaries going forward, while the work being sent overseas is already migrating up the value chain from call centers, help desks and low-end programming to design, accounting, high-end programming, financial analysis and consulting.

Some raise concern about the national security implications of off-shoring, asking whether U.S. interests are put at risk by increasing dependence upon foreign nationals to handle economically critical tasks and, often, highly sensitive data - particularly in nations that have not historically been close United States allies. Many nations to which such work is sent present apparent geopolitical risk (e.g. India and Pakistan), and some ask whether the potential for disruption to American supply chains is being considered adequately. Others suggest offshore outsourcing entails many hidden costs and far fewer savings than outsourcing consultants advertise, and that offshore outsourcing is being driven by the same mentality that helped generate the tech bubble.

The Positive

Many people think that the rise of global competition in service work is a net positive trend for our nation. Competition drives down prices for businesses and consumers and increases their choices. By outsourcing to lower cost operations, businesses are able to reduce their overhead, compress time-to-completion with around-the-clock operations, and focus on core, strategic investments and hiring. Many manufacturers, for example, are running leaner, more competitive operations as the result of outsourced IT services, focusing their resources on the research, design and processes for improving their products. Thus proponents argue that offshore outsourcing some service work enables employers to preserve the rest of the jobs here in the U.S.

In addition strategic outsourcing has several advantages; these advantages can help the organization achieve a competitive superiority. The following are some of the benefits outsourcing could offer an organization:

* Outsourcing jobs help to improve a business' focus. What this basically means is that with the help of outsourcing companies can focus more on boarder issues while the operational angle of the business is done by a third party.

* Outsourcing jobs provides access to world class capabilities, as your business gets the benefit of an international staff.

* Outsourcing jobs accelerate the streamlining of a business. This is because businesses are allowed to focus more on the long term goals rather than on operational concerns.

* Outsourcing jobs means that risk is shared. This means that companies become more flexible and more dynamic and are better able to make challenging business decisions.

* Outsourcing jobs mean being able to pay attention to more strategic activities of a business, as the company changes its focus from non-core activities to activities that are able to boost profits in the long run.

* Outsourcing jobs mean tax cuts

* Outsourcing