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Effects of Outsourcing Companies Positions to Low Cost Countries Part 2

 

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History of Outsourcing

Looking at the history of human development, the history of outsourcing companies dates back to the industrial development that began in the late 17th century. For instance, the making of America's covered wagon covers and clipper ships' sails was a job outsourced to workers in Scotland, with raw material imported from India. England's textile industry became so efficient in the 1830s that eventually Indian manufacturers could not compete, and that work was outsourced to England. The ancient Chinese empire and the Japanese were also adept at outsourcing to their conquered nations. Looking at recent times, in the USA many computer companies used to outsource their payroll processing in the 1970s and 1980s.

Learning that outsourcing existed since the early days of our civilization, one may wonder why no one talked about it, let us say, 10-15 years back? The reason outsourcing stayed out of the news is because it used to happen on a small scale and was concentrated in some specific regions, like the USA, Europe. But now outsourcing is a $400 billion a year industry and the world cannot afford to ignore it. Globalization, explosive growth of Internet, and the development of information society in every region of the world has made outsourcing an integral part of the world economy.

 

We are focused on Information Technology (IT) outsourcing. IT outsourcing gained momentum after the Internet started bringing together every corner of the world, and globalization brought down national barriers.

  • Nowadays American companies such as Intel and Sun Microsystems have larger research and development outside the United States than within the nation, Citibank has card processing outsourced to India, and customer support at Dell comes from the Philippines.

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  • Some look at outsourcing as a way in which developing nations can have access to the new technology enjoyed by the developed nations and a way towards economic and social empowerment.

Relevant Research on Outsourcing

The most relevant research conducted is that done by LOMA, which explores the pros and cons of outsourcing and offshoring companies duties. The focus of the research report is on information technology (IT) outsourcing and offshoring to IT service companies in the Unites States and India. Sources for the report include SEC filings, Internet sites, press reports, and government research.

However, it must be stated that there is a lack of theoretical research on outsourcing. The knowledge base of companies does not focus on theoretical research but on financial data and global economic and political trends. What we have observed is that the IT industry is looking at outsourcing as an economic phenomenon and is not focusing on research the way it has for the field of software, microprocessors, the Internet etc.

 

Why is outsourcing companies an important issue? Referring to our problem statement, we would like to stress that the problem is significant not only because of its impact on IT outsourcing industry but also because of its impact on the global economy as whole. We know that outsourcing is a $400 billion a year industry and IT outsourcing is a vital part of the industry. A slump in IT outsourcing would mean a loss for the global economy. Since the problems facing IT outsourcing (such as political pressure in the USA and lack of infrastructure in the host developing countries) can seriously slow down the growth of IT outsourcing, the problem facing this industry is significant. In conclusion, we would like to state that nothing should be judged in a void. If we judge outsourcing by itself we would not be able to say whether it is good for society or not, but if we view outsourcing from the perspective of the global economy, increasing globalization, rising cost of production in USA, and lower costs in developing countries, we can see that outsourcing has a positive side too. Although fewer than 20% of the total American software companies outsource their jobs to outsourcing companies, in general offshore outsourcing ("offshoring") is seen as something bad for America. We hope that with this study we would be able to present a balanced picture of outsourcing.

 

Effects of Outsourcing Companies Positions to Low Cost Countries Part 1...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 3...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 4...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 5...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 6...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 7...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 8...Read More

 

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