Outsourcing America

Outsourcing America

Companies in today's global economy are faced with many decisions regarding the viability and profitability of their business. Among the topics for these questions are international competition, employee rights and shareholder profits. These ethical questions are at the heart of the debate over outsourcing. The employees who have been affected by this business practice will tell you that corporate greed is the cause. Whereas, many in the business world will say that outsourcing is vital to staying competitive. If a company outsources jobs because of corporate greed and the selfishness of the top executives, then it is unethical. However, if outsourcing is done out of competitive necessity and the needs of the employees are a major consideration during the process, then indeed outsourcing may be the most ethical action that can be taken.

Outsourcing is not a new way of doing business. In Fact, job outsourcing has been around for decades. It is only with new technology that this form of business has become so accessible. It began when programmer jobs were outsourced, then it moved into the manufacturing industries (steel mills), finding itself in its most recent trend, of outsourcing white-collar jobs. The corporations took advantage of a digital universe to start moving jobs overseas to cheaper labor markets. It is only now, that some notice is being taken to its rapid development.

Critics claim that outsourcing costs American jobs and that it harms the U.S. economy. Many feel that manufacturing jobs are declining specifically due to outsourcing to poor nations, and that only greedy corporations benefit from outsourcing.

Many definitions of outsourcing exist; our textbook defines outsourcing as the assignment of various functions such as accounting, production, security, maintenance, and legal work to outside firms. (Nickels, McHugh, McHugh.) Some other common examples of outsourcing include the manufacturing of components, computer programming services, tax compliance and other accounting functions, training administration, customer service, transportation of products, benefits and compensation planning, payroll, and other human resource functions.

A relatively new trend in outsourcing is employee leasing, in which specialized vendors recruit, hire, train, and pay their clients' employees, as well as arrange health care coverage and other benefits. (Encyclopedia of Small Business.)

Outsourcing can be undertaken to varying degrees, ranging from total outsourcing to selective outsourcing. Total outsourcing may involve dismantling entire departments or divisions and transferring the employees, facilities, equipment, and complete responsibility for a product or function to an outside vendor. In contrast, selective outsourcing may target a single, time-consuming task within a department, such as preparing the payroll or manufacturing a minor component that can be handled more efficiently by an outside specialist. (Encyclopedia of Small Business.)

Outsourcing has evolved into other forms, including offshoring and near-shoring.

No commonly accepted definition of offshoring exists, and the term has been used to include various international trade and foreign investment activities. Services that U.S -based organizations purchase from abroad are considered imports. They may also be linked to U.S. firms' investments overseas. In recent years, services offshoring has been facilitated by factors, such as the Internet, infrastructure growth in developing countries, and decreasing data transmission costs. Organizations" decisions to offshore services are influenced by potential benefits such as the availability of cheaper labor and access to foreign markets, and by risks, such as geopolitical issues and infrastructure instability in countries that supply the services.

Another form of outsourcing is called nearshore outsourcing. Nearshore outsourcing defined is the term used to refer to the practice of getting work done or services performed by people in neighboring countries (e.g. Canada, Mexico) rather than in your own country. (www.businesstransformationoutsourcing.com)

There are many noted advantages and disadvantages to outsourcing. The American public is probably more familiar with the arguments for or against doing it at all, as the heated debate between political parties, labor unions and corporate lobbyists rage on.

Proponents such as Kane, Schaefer and Fraser (2004), argue that outsourcing represents less than 1 percent of gross job turnover in America, and that economic freedom is actually vital to economic growth and job creation (p.1). They also note that although manufacturing jobs are declining, they are declining worldwide, even in China (p.2). Yet, our workforce continues to grow, with more Americans employed than ever before (p.1). Supporters also maintain that although some U.S. employees lose their jobs, far more keep their jobs because outsourcing helps corporations remain competitive and cost reductions can actually create new market opportunities, thus generating new jobs within the United States (Weidenbaum, 2004).

Believe it or not, most Americans support outsourcing, as demonstrated by their shopping habits. The popularity of Wal-Mart and other discount and dollar stores that are stocked with foreign goods, and the fact that they drive foreign cars, drink imported coffee and buy foreign toys and electronics bares this out. Globalization allows Americans to get cheaper products, supports growth in developing countries, and creates profitable companies (Taillon, 2004).

Despite the ongoing controversy on outsourcing, as long as Americans continue to want products and services at lower prices, corporations and businesses will continue to look to outsourcing as a means to cut costs. But it is important for these companies to evaluate the advantages and disadvantages of outsourcing from a business perspective. In these terms, a company must weigh the obvious advantages, such as cost savings, staff restructuring, and increased focus on the core business (Gale, 2005), as opposed to possible disadvantages, such as loss of managerial control, hidden costs, and threats to security and confidentiality (SoftwareProjects.org, 2005).

Murray Weidenbaum of the Weidenbaum Center on the Economy wrote, "Companies who outsource just because 'everybody is doing it' may be surprised by unexpected costs and complications." (2004, p. 5). He notes that about one-half of outsourcing arrangements are terminated due to such factors as financial difficulties, unreliable suppliers, rapid turnover of employees, and limited managerial experience. Hidden costs can come in the form of inadequate