Outsourcing

Outsourcing to foreign shores, or offshoring, is an idea that has long been in practice, yet meets resistance when American business seeks to send jobs overseas. Sending jobs overseas may help a faltering American business keep their doors open and keep more important jobs open for American workers. Outsourcing has been a business practice for hundreds of years. Adopting legislation to curb Offshoring will limit American businesses competitive edge, one that helps small business thrive and grow, and helps big business to plant an American flag in the international business of offshoring.

Offshoring began in the industrial revolution, with the advent of advances in transportation and communication. America had successfully entered and benefited from the practice of outsourcing to foreign countries. During the Y2K situation and the dot com boom days, outsourcing became a necessity when the US ran short of qualified IT people and turned to outsourcing to India to fill the need.

When the dot com situation came to an end, companies no longer required the same number of people and so eliminated those that were cost prohibitive in the new lower IT budgets that were to become the norm. With more and more companies turning to offshoring as a means of staying competitive, just as many companies were using offshoring as a means of being more efficient.

If America were to discontinue outsourcing to other countries in favor of hiring exclusively American workers, smaller businesses would simply shut down. Small business in America depends on offshoring. Everything from industrial to IT has become affordable due to offshoring. Without offshoring, smaller businesses would shut down and raise the unemployment rate.

Let us dispel some common misconceptions about offshoring. One misconception is that offshoring sends American jobs overseas. The U.S. has lost 2 million jobs due to global trade over the past 20 years but in just 10 years has added 35 million new jobs (Kirkpatrick, David 2004). While American businesses are sending jobs overseas, it does not mean that these jobs are for Americans. Many qualified American white-collar workers would not work at the same salaries offered by smaller or start up companies. Many companies are spending less and less on human resources to stay competitive. A typical salary would start at $50,000; add administrative costs, training and benefits and you are at roughly $78,000, a 56% increase on the original estimate (Gambhir, Satnam 2004). A typical outsourced worker would come in at much less than the original estimate of $50,000

Another misconception is that very few quality businesses are involved in outsourcing. Nothing could be farther from the truth, according to Satnam Gambhir, “In fact, it would be challenging to find a single Fortune 500 company that is not outsourcing any part of its daily business operations to offshore outsourcing firms.” In order to stay competitive in this new business practice, American businesses have to realize that American technology in IT and Telephony and fiber optics directly contributed to the outsourcing boom (Gambhir, Satnam 2004).

The myth that offshoring will increase unemployment can be addressed easily; Employment is on the rise according to Global Insight inc. John A. Challenger writes, “While the practice of outsourcing is thought by many to be a destroyer of jobs, it is likely to create more jobs than it eliminates.” Challenger also states, “The Bureau of Labor Statistics has estimated that total employment is likely to increase from 144 million jobs in 2002 to 165 million in 2012, largely as a result of outsourcing.” Challenger also states, “A growing number of economists agree that outsourcing contributes to increased productivity and helps keep inflation in check.”

Another misconception, that America does not insource, that we only outsource, is also very untrue. The number of jobs insourced is growing at a faster rate than jobs lost overseas. (Kane, Schafer and Frasier 2004) Not only are better jobs insourced, but also new jobs are being created. John A. Challenger has suggested “Offshore Outsourcing Coordinator” “…This person may also be in charge of assisting workers whose jobs have been dissolved or moved abroad.”

There have been rallying cries for the legislation of offshoring. There is legislation that is being written to limit offshoring or to encourage companies to keep as much work within the country as possible (Kakumanu and Potinova 2006). Over 35 states have introduced bills that would affect companies looking to outsource or already outsourcing (Mozumder) (Kakumanu and Potinova 2006)

American business needs to be strong to keep our economy strong, and that includes the international business of offshoring. Other countries have already taken the next step to take the next level, to be leaders in this industry. India has already taken the time to plan and build a strategy to bring their people past being low income workers outsourcing to other countries to software development, better trained IT people and management, to become a better resource for all nations. Some Indians have already forsaken their own culture to become a better service provider for the world (King 2005).

Wipro, an Indian business services company, has studied and is implementing “The Toyota way” a Japanese business system of continuous improvement, automation, process reengineering, respect for employees and the acceptance of change, all needed to compete in the international marketplace. (King 2006).

Soon, we will be in competition with our outsourcers, for jobs, product and management. India has committed itself and other countries are following their lead. Michael Spellacy vice president of the Boston Consulting Group says that, “Wages have increased roughly 11 percent in each of the past three years with little sign of abating, in major cities like Bombay and Bangalore, inflation has climbed as high as 14 percent, with worker attrition rates now averaging 25 percent. A full-time worker in outsourced financial services in India earns between $22,000 and $27,000.”(Spellacy June 2006)

In the eighteenth century, England colonized India, and all governmental business was done in English. Governmental business in India is still done in English, and today, India has the third most English-speaking people behind the U.S. and the U.K. This makes India a perfect source for offshoring for the U.S. They have displaced their own culture,