Pros and Cons of Outsourcing

Pros and Cons of Outsourcing.

1. Introduction

Globalization has lead to increase in international trade and a greater role for multinational corporations. With the rise of globalization many companies are turning to either off shoring or offshore outsourcing. In India and China, companies like IBM, Microsoft, Hewlett Packard, and Novell choose to get services from sub-contractors in these countries or move their development and support jobs there.

Outsourcing is to contract out some of company’s activities to a third party company. The company who outsourced and the third party who is going to handle the activities for the company are joined by means of an outsourcing arrangement.

This practice became even more popular after the dot-com crash of the early 21st century. As many businesses struggled with cash-flow problems, many investors were leary in investing money in high-tech companies, which many felt were still vulnerable to the dot-com effect. Struggling to do more with less, companies looked for less expensive avenues of development and support. For the United States, Indiaseemed like a perfect resource for these needs since most nationals speak english. A company can hire an engineer in India, for example, for US$10,000 a year where an equally qualified engineer in the U.S. could cost $60,000-$90,000 a year.

Outsourcing has been big political issue as highly educated and highly paid IT workers lose their jobs. In this competitive environment, companies have to concentrate on competency and they want to outsource everything to reduce cost so the trend toward offshore outsourcing is increasing. Outsourcing threatens that in future US will not have many technology people. As all the technical work will be ...

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