Offshore outsourcing and its impact on America

Janil J.

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Offshore outsourcing and its impact on America

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Abstract

Although no one knows the exact size of offshore outsourcing businesses there is no doubt it has become a leading way to manage costs and reduces time to delivery for a large number of companies in the Western continents. Due to the proliferation of globalization companies around the world are resorting to offshore outsourcing with the view to compete successfully against others by decreasing their bottom-line costs and increasing profit margins. Major Banks, IT and service oriented companies have managed to save costs through low wage countries, and remain successful within their respective industries. Even government organizations have also resort to offshore outsourcing of sensitive data threatening the position of the country. However, with these advantages there are disadvantages as well.

Introduction.
Impact on the US economy.
1. The term outsourcing according to Dr. William Llewellyn.
2. High profits as the motivating factor.
3. The manufacturing industry.
4. Experts at McKinsey Global Institute: Identifying sunk costs in physical and human capital.
5. Cost saving explanation for offshore outsourcing.
Benefits of offshore outsourcing.
1. Proponents of offshore outsourcing.
2. 'The specific decisions are made on hard-nosed business grounds'.
3. Generating jobs abroad and opportunities for their products and services.
4. Albino Barrera: Outsourcing jobs overseas make economic sense.
5. The range of activities being outsourced.
Risks and negative impacts of offshore outsourcing.
1. Making offshore outsourcing decisions on the basis of availability of human resources and services available.
2. BPO: employees belonging to the average middle or lower class.
3. BPO: Businesses proliferation to defense industries.
4. Offshore outsourcing and the demand for high cost healthcare and benefits by local workers.
Future overview of offshore outsourcing.
1. The outlook for offshore outsourcing.
2. Karaomerlioglu and Ansal: Sustainable long term growth strategy.
3. States and federal governments.
Conclusion.
References.

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[...] To serve this purpose, US companies have resorted to outsourcing, and then later on offshore outsourcing of business processes to effectively and efficiently compete with leading companies of the world and widening the profit margins. According to Dr. William Llewellyn (Marsh 2005) the term outsourcing refers to "the practice of the acquisition of services from specialist suppliers, including payroll management, plant maintenance, logistics and distribution" and it often occurs within the same country. Offshoring on the other hand refers to "the acquisition of finished goods or services from companies based in other countries. [...]

[...] Consequently, the economy's infrastructure is weakened leaving the country dependent on outsourcing companies for its progress and development Future overview of offshore outsourcing Given the above discussion the outlook for offshore outsourcing seems daunting for both the US as well as those countries where its companies outsource. The economic implications grave as experts predict a future filled with risks and negative impacts on the economy. Wages aside, many predict the deterioration of social status due to the shifting of a high number of jobs abroad. [...]

[...] US politicians try to ban offshore outsourcing with the view to eliminate the risks of complete dependency on the foreign based companies for their economic progress and performance. They are concerned about the end benefits, as more and more companies in India and China are gaining comparative advantage over US firms and sometimes without government licensing (Kripalani 2004). The government in this regard play a critical role in directing the course of actions for US firms as well as for those offshore outsourcing companies that contract services to be offered. [...]

[...] Offshore outsourcing help refine human resources and make efficient use of natural resources at locations where they are plentiful, and therefore help these countries to provide products and services which the US can refine to command better prices at a lesser cost. The US companies then can concentrate on the manufacturing of airplanes, high end computer chips, and advanced software - products that have higher profit margins and reap better prices in the global market (Barrera 2004). Barrera also argues that the deteriorating quality of life, and social milieu associated with globalization cannot be attributed to offshore outsourcing alone. [...]

[...] Karaömerlioglu and Ansal (2000) indicate sustainable long term growth strategy require advanced countries to show decreasing minimum wages due to the high level of competitive wages offered to the offshore outsourcing companies. High level of unemployment as well as enforcement of inflation rate imply that minimum wages will reduce even further, with low benefits and social security nets. The demand for local employment reduced due to the increase in offshore outsourcing would eventually force the government to expand economy's factors of production to other countries of the world, thereby increasing even more problems for the local manufacturers to "remain at home". [...]

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