Outsourcing and Offshoring of IT to India

2727 Words6 Pages
bulb-icon

Recommended: Indian economy an essay

Outsourcing and Offshoring of IT to India

Introduction

One of the hottest trends today for big corporations is outsourcing and offshoring. Outsourcing simply means a company based in one nation will hire from other nations in order to more efficient accomplish its goals. It makes sense on the part of the corporation, why pay a programmer in the US $80,000 a year when they can pay a programmer in India less than 1/10th of that salary, and make him a very happy man. This because even when he is earning 1/10th of the US salary, he is still earning more money than he ever hoped to get in that industry in India. It seems like a win-win situation1, but there is still a loser: The growing unemployed population of the US. As more jobs go overseas, more US citizens are finding themselves becoming obsolete.

Recent History of IT in the US

Between 1987 and 1997 imports used in US manufacturing rose from 10.5% to 16.2%2 and in High Technology rose from 26% to 38%. The US has a long history of outsourcing blue-collar jobs, including those that are intermediate steps within business processes in many industrial sectors. Manufacturing’s outsourcing success can be attributed to the lower cost structures found in many East Asian countries such as China, Taiwan, South Korea, and Malaysia and others2. These countries not only provide a lower cost structure, but also have a highly educated work force and business friendly environment. Outsourcing of blue-collar jobs has increased the demand of white-collar jobs in the US. The focus on white-collar jobs by US firms has pushed US profitability upwards.

The outsourcing trend continues to eat up the value chain from blue-collar jobs to white collar jobs3. The software industry is experiencing an outsourcing trend to countries such as China and most significantly to India. The proliferation of the Internet has opened easier access to information and collaborative environments. Previously communication costs and access to mind power was limited. The Internet made communication costs virtually free and collaboration with groups around the makes software engineering and collaboration tasks easier. In additional, liberalization of free markets across international lines has made it easier for companies to set up and outsource engineering tasks throughout the world. Business-process and software outsourcing rely on cheaper cost structure as found in East Asia with manufacturing4.

Show More
Related

  • On How American Companies Started Offshoring White and Blue Collar Positions to Other Countries with Low Pay since the 1960's

    2192 Words  | 5 Pages

    In the 1960’s American Companies started offshoring job positions to Asian countries, and Hispanic countries. American Companies started offshoring American Jobs because their business was more profitable in other countries, so in order for the companies to be closer to those countries American Companies started hiring employees in those countries. Furthermore, as American companies realized how much money they could save by offshoring jobs to other countries with low income they started offshoring more jobs with the purpose of saving money. As American companies offshored white and blue collar positions, their profit incremented and they were able to invest more money in their products. The objectives of this report are the following:

    Read More

  • Outsourcing in the U.S. Apparel Industry: Economic Benefits and Ethical Concerns

    2018 Words  | 5 Pages

    The apparel industry (as well as many other industries in the U.S.) has seen a sharp rise in outsourcing manufacturing overseas – a trend that does not seem to be slowing down. In 1980, $250 billion were spent on importing goods from foreign countries (Cho and Kang). By 1999, this number almost quadrupled to $937 billion in 1999 (Cho and Kang). More recent data also shows a significant surge of apparel production outsourcing. In 2007, the U.S. imported ...

    Read More

  • Outsourcing: Pros and Cons

    527 Words  | 2 Pages

    Mankiw and Swagel (2006) argue outsourcing is not as large a phenomenon as the media describes. Their research indicates outsourcing accounts for very little of job loss in the United States, nor has it made a distinct contribution to the slow rebound of the labor market. They go on to propose that increased overseas employment has actually contributed to higher employment in parent United States companies. They reported that while 30,000 jobs were lost per month in 2004, two million job changes per month were happening as well. They reference the Bureau of Labor Statistics when they report that in 2015 there are expected to be 3.4 million jobs outsourced, but 160 million jobs gained here in the United States. They also claim that there is a rise in net US income by 12-14 cents per dollar of outso...

    Read More

  • Outsourcing as a factor in the United States recession

    660 Words  | 2 Pages

    Outsourcing is a complicated and a multifaceted subject that involves a “business[’s] purchase of parts or labor from another company rather than maintaining a sufficient enough number of its own employees to do the same work in the country where the company is already based” ("Outsourcing"). The first practice of outsourcing was in medieval times when “nation-states called in soldiers-for-hire to help their own military forces during ongoing conflicts” ("Outsourcing"). Many think of outsourcing as a one way trade of production facilities moving outside of a companies locale but in actuality it is a two way trade that also involves companies from other areas moving their factories to local areas where conditions are beneficial for the specific business. Outsourcing has evolved but the main idea has remained the same. The recent increase in outsourcing “was initiated by Wall Street pressures on corporations . . . . for increased profits . . . in the production of goods and services marketed in the U.S."(Roberts).

    Read More

  • The Outsourcing of American Jobs

    1024 Words  | 3 Pages

    As the problem of job outsourcing becomes more of an issue in politics, elected officials like the President and Congress will no longer be able to ignore the dilemma. The war in Iraq has been at the forefront of the presidential race but the importance of outsourcing American jobs seems to have been slightly overshadowed. If the issue of outsourcing is not watched carefully and a definitive plan hammered out, a trickling down of negative effects may occur within the U.S. economy. However, there is a polarized opinion on the effects of this “phenomenon”.

    Read More

  • Labor in the United States and Outsourcing

    1040 Words  | 3 Pages

    Outsourcing emerged on the financial arena during the 1980s and has since then been spreading. Outsourcing production was furthered with the process of globalization which provided a new component leading to the strengthening of resources, skill and labor specializations across the world. The process of outsourcing is using the skill and abilities of a third-party to accommodate society on the foundation of labor. As stated earlier, it was during the 1980s that the process kicked off mainly due to the efforts of corporations when they began to hire labor forces across the world. Even though outsourcing has come out from its developing stages, there are still following effects on the US economy.

    Read More

  • Outsourcing and the US Labor Market

    1210 Words  | 3 Pages

    Both sides can agree that outsourcing can be desirable for a business do to the potential profit. It allows goods to be made cheaper, management to run smoother, and money to be made faster (Salanţă 270). Both sides can also agree, however, that U.S. jobs are lost as a result of outsourcing (Ahmed 192), as well as environmental damage being cause due to corporations taking advantage of loose environmental regulations (Marquis 39). Upon digging deeper into this debate, one can find that both sides present very convincing arguments.

    Read More

  • Restoring American Competitiveness by Gary P. Pisano and Willy C. Shih

    963 Words  | 2 Pages

    The U.S. industries have been outsourcing manufacturing for several decades now. U.S. companies thought they were reducing costs by outsourcing development, manufacturing, and process-engineering abilities. Consequently, U.S. corporations’ knowledge, skilled workers, and supply chain, which are the necessities to producing advanced products, have vanished. For example, almost all notebook computers, cell phones, and handheld devices, which were once created in the U.S., are now designed in Asia. When a major U.S. company outsource, it pressures their rivals to do the same thing. They also lose the expertise of process engineering, which would interact with manufacturing on a daily basis. Minor companies and skilled workers go to where the jobs and knowledge networks are no matter where they are geographically in the world. This decline of trade in the U.S. has caused a negative chain reaction to their suppliers of sophisticated materials, tools, production equipment, and components. U.S. industries do not have a way of coming up with new ideas for the next generation of high-tech products...

    Read More

  • The Sarcastically Wonderful World of Outsourcing

    905 Words  | 2 Pages

    ...ect on the college graduates and younger children of today. Outsourcing has made nothing but trouble for the United States with the passing of free trade agreements. It will cause a lack of jobs that will run the economy into the ground, and ruin the lives of the citizens of the United States. All of that so a business can use its faulty practices to make a higher profit. Outsourcing has consequences that will haunt the average American and their families for the rest of their existence on this planet.

    Read More

  • Strategic Outsourcing At Bharti Airtel Limited

    1494 Words  | 3 Pages

    The main problem Bharti Airtel Limited facing is "How to manage its capital expenditures for its operations and how to face the expected exponential growth and a competitive environment." The challenges that the company is facing are

    Read More

  • The Pros and Cons of Outsourcing

    1607 Words  | 4 Pages

    Outsourcing has been around for many years. In this paper, I will discuss some of the history of outsourcing, the good things about outsourcing, and the bad things about outsourcing. Outsourcing is important because many companies rely on it in order to get many different products and services to their facility on time and in good shape. Outsourcing is a huge part of the business industry today. Any business can be affected by outsourcing.

    Read More

  • Outsourcing Development Work to India

    2311 Words  | 5 Pages

    Globalization has had a major impact on the way business is conducted. Companies are increasingly turning to offshore software development outlets for design management. Anywhere from one-half to two-thirds of all Fortune 500 companies are already outsourcing to India and the amount of work done there for U.S. companies is expected to more than double this year according to Forrester Research. This paper will take a look at some of the arguments for and against outsourcing IT development to India. Most importantly this paper will take a look at ethical standpoints taken on outsourcing. But first, we'll take a look at the history of outsourcing to India.

    Read More

  • Essay On Offshoring

    596 Words  | 2 Pages

    Some proclaimed that offshoring can bring benefits to the organization and its stakeholders, instilling the idea that they will reap the benefits of higher profits through the practice of offshoring. The profits earned from offshoring certain jobs and aspects of the company could be used for further investments in the firm, claiming that development of employment opportunities for workers is imminent (Bryan, 2011). Although this does paint an impressive picture of the possibility of what offshoring can provide, this however does not reflect the reality being experienced in the United States, in terms of the employment situation for the working/middle class. This is a downside to offshoring as it is affecting the middle class by reducing its numbers, further widening the gap between the rich and the poor in the United States (Bryan, 2011).

    Read More

  • Strategy in Global Manufacturing

    1968 Words  | 4 Pages

    The trend in the global manufacturing industry focuses its attention on bringing manufacturing back to the United States, known as reshoring. The major cause for this decision is mainly due to the rising labor cost that occurs in places like Vietnam, China and other outsourcing countries. As NPR News stated, “… at least 200 companies have already returned, and there's been a dramatic jump recently in the number of companies saying they're seriously thinking about [reshoring] .” According to the Wall Street Journal, the increase in labor cost was made by the government to boost the domestic consumption and economy without relying too much on export . However, with the increase in wages, those countries are losing its competitiveness in the manufacturing industry. Multinational companies, especially from the United States, realized that the strategy of producing goods by outsourcing has become ineffective.

    Read More

  • It Industry In India

    1010 Words  | 3 Pages

    During the past decade, the Indian IT industry has been experiencing a dramatic growth. It grew from Rs.4.7 billion in 1991 to Rs.755.47 billion in 2003, accounting for nearly 3% of the GDP. The revenues generated from software exports reached $10.4 billion for the financial year 2003 with a 30% growth over the previous year. The main factors which contributed to the success story of the Indian IT industry are:

    Read More

More about Outsourcing and Offshoring of IT to India

Open Document