Pros And Cons Of Offshoring

According to Oxford Dictionaries (2015), offshoring is “The practice of basing some of a company’s processes or services overseas, so as to take advantage of lower costs” (pp. 1). An enhanced definition for offshoring is: “The moving of various operations of a company to another country for reasons such as lower labor costs or more favorable economic conditions in that other country” (Business Dictionary, 2015). Offshoring is also known as outsourcing; many people seem to dislike offshoring, because they associate the word outsourcing with job loss. This paper will provide insight into ethical dilemmas associated with offshoring.

In India, a company can hire ten engineers’ verses hiring one engineer in the United States; the reason is employee compensation. In the United States an engineer may be paid $80 thousand per year and receive company benefits and 401k plans. From an ethical perspective, taking jobs from the United States and putting them into another country lands citizens’ in the unemployment line. Most companies try to evaluate the consequences of outsourcing certain aspects of the business then make a uniform decision (Friedman, On Justifying Outsourcing and Offshoring, 2012). There are several pros and cons to outsourcing.

Main advantages for businesses are cost

savings; in-house employees are always more expensive than outsourced employees (PRLog, 2009). The quality of services and specialized skills are another major advantage (PRLog, 2009). Most third party resource providers are concerned about their reputation, and the quality of the product (PRLog, 2009). More times than not the third party company specializes in the service being provided (PRLog, 2009). Another advantage of outsourcing is contractual obligation and risk mitigation (PRLog, 2009). A business takes on less of a risk when outsourcing services; the third party company then inherits that risk to a certain extent. Even though there are an overwhelming amount of pros for outsourcing; there are also cons.
One of the major cons of outsourcing is linguistic barriers (PRLog, 2009).

Understanding the requirements of a project is extremely important, but if a company cannot communicate proficiently the work will likely be incorrect. The third party company may not acquire resources that research the company culture, and have the ability to engage in knowledge transfer (PRLog, 2009). When outsourcing to a company in India a company must also work with the time difference. Since the third party company is outsourced, there may be rework needed as industry standards change daily. The biggest reason people tend to shy away from offshoring, where possible, is because outsourcing usually means job

loss.
Offshoring activities tend to be frowned upon by American citizens in the United States. From youth to adulthood education has been the main focus of life. If a person gets an education then a job is practically guaranteed; especially technical jobs. High level education is advertised to guarantee job security and reward citizens with jobs; these jobs will assist in paying back student loans (Friedman, On Justifying Outsourcing and Offshoring, 2012). Ken Courtis, an executive at Goldman Sachs Asis, explained how offshoring jobs actually make economic sense due to cost (Friedman, On Justifying Outsourcing and Offshoring, 2012). Economically, outsourcing makes sense from a corporate savings perspective, but it does not make as much sense from an ethical perspective.
One ethical dilemma is social responsibility. The company, in theory, believes money is more important than increasing avenues in the nation. If jobs were more important to the company, they would keep more jobs in the United States. Taking jobs from the United States goes against the social behavior of business outsourcing (PRLog, 2009). Outsourcing will result in growth of unemployment (PRLog, 2009). Once people are unemployed they cannot support their family, and in turn may cause deeper issues.
The second ethical dilemma is the staff turnover (PRLog, 2009). People tend to debate on the quality of the service being provided by the third party company (PRLog, 2009). Knowledge transfer will suffer as the language barrier increases. Confusion tends to set in from the errors, and the staff turnover will increase. The typical “cookie cutter” job will cause people to loathe the job after a while; which contributes to attrition (PRLog, 2009). In the United States, people tend to move departments every few years to keep their job new and exciting.
The last ethical dilemma is the obligations companies have with stakeholders (Friedman, An Economic and Ethical Analysis of Offshoring: Intercountry Outsourcing of IT Employment, 2005). Most companies are obligated to drive down costs and increase company revenue (Friedman, An Economic and Ethical Analysis of Offshoring: Intercountry Outsourcing of IT Employment, 2005). Stakeholders tend to think about the “greater good for the majority”; whereas that philosophy might be appropriate at that time, but may shift heavily in the future. Offshoring should not be considered a long time solution to financial problems (Friedman, An Economic and Ethical Analysis of Offshoring: Intercountry Outsourcing of IT Employment, 2005). According to Friedman (2005), “The final accounting of whether offshoring is beneficial or detrimental, and to whom, has yet to be tallied” (p. 520).
Although it is unethical to terminate/lay off people that have succeeded at their job; from a business mindset outsourcing makes sense. The overall goal of any company is profit and if the company can get more for less that’s all the better. I personally think it is unethical to take jobs away from hard working person; especially one that works hard and attended college to secure a job. Opportunities have become few and far between since the outsourcing model has become more advanced. If the United States does not stop outsourcing so much work; there will be no work left for people whom have major debt. Most importantly the outsourcer may become the outsourced.