The Impact Of Outsourcing On Corporate America

The Impact of Outsourcing on Corporate America

The economy is still unable to find a way where unemployment is not an issue that is considered in the four macroeconomic policy goals. The four macroeconomic policy goals consist of price stability, balance between imports and exports, high, but sustainable economic rate of growth and full employment. To be unemployed, one is considered out of work, physically able to work, in search of employment and actually claiming benefit, such as one receiving unemployment benefits. This does not include women who are unemployed if their husband is earning enough, sick and disabled workers, such as one receiving disability benefits, students and those who retire. One factor that is rapidly affecting unemployment is outsourcing in corporate America. "Outsourcing is the act of transferring some of a company's recurring internal activities and decision rights to outside providers, as set forth in a contract" (Greaver 3). Outsourcing has left millions of American workers unemployed. Economists want full employment, but they fail to take action against outsourcing and it is increasing rapidly and destroying millions of jobs and job opportunities. Although economists are unable to control this behavior, they should strive to discuss this issue with CEO's and solve this problem before the situation worsens and causes more job losses. Although outsourcing has an impact on unemployment, it also has many advantages and benefits for corporate America.

Strategic outsourcing asks questions about outsourcing and its relevance to the organization. Questions concerning the visions of the organizations future, current and future core, structure, costs, performance and competitive advantages. With organizations answering these questions it lets them know if strategic outsourcing is appropriate for the organization. (Greaver 8) There are five strategic reasons for outsourcing. They include, to improve business focus, gain access to world class capabilities, accelerate re-engineering benefits, share risks, and re-direction of resources. Outsourcing allows companies to focus on broader business issues while having operational details solved by an outside expert. For many companies, the reasons for outsourcing are the issues that require attention from management. (Greaver 9) Outsourcing providers bring extensive world-class resources to meeting the needs of their customers. Partnering with an organization with world-class capabilities can offer access to new technology, tools and techniques that the organization may not currently possess. This can lead to a competitive advantage through expanded skills and technology at a faster rate of procedure. Outsourcing is a powerful management technique. (Greaver 9) It allows an organization to realize the benefits of reengineering by having an outside organization, one that is already reengineered to world-class standards and process. There are risks associated with the investments an organization makes in technology. When companies outsource they become more flexible, more dynamic and able to change to meet opportunities. Every organization contains limits on the resources that are available to it. (Greaver 12) Outsourcing redirects resources from non-core activities to activities that provide in serving the customer. Non-core means the outsourced area outside corporate America. These are the five strategic reasons organizations outsource, but along with these reasons evolve consequences that are not always beneficial to organizations. (Greaver 12)

There are five tactical reasons for outsourcing. They include, on time applications, reduce and/or control operating costs, make capital funds available, generate a cash infusion, and secure resources not available internally. Applications needed for on time production require high manpower resources at a point of time. Therefore, organizations need to increase and decrease production in a short notice, which eventually becomes expensive. (Greaver 13)The most important tactical reason for outsourcing is to reduce and/or control operating costs. Access to outsourcing provides lower cost and is considered the greatest short-term benefits of outsourcing. Outsourcing reduces the need to invest capital funds in non-core business functions, which makes capital funds more available for core areas. (Greaver 14) It can also improve certain financial measurements by not having to show return on equity from capital investments in non-core areas. Outsourcing involves the transfer of assets from the customer to the provider. Companies outsource because they do not have access to the required resources within the organization. For example, if an organization is expanding its operations to a new place, outsourcing is important for building capability from the ground up. (Greaver 15)

Along with the positives mentioned above, there are many objections to outsourcing. The number one objection to outsourcing is unemployment. Others consist of reduction in wages and benefits, providing private corporations with a means to escape government regulations, providing private corporations with a means to escape taxation, and reduce incentives for raising productivity. The main issue at hand is unemployment. (Hira 21) When American workers lost their blue-collar jobs, they began to receive education in the areas of technology that would assure them job security, which was proposed by corporate America. These job positions are now outsourced to countries such as India, Hong Kong, Panama, Manila, The Philippines, Mexico, and many other countries where the local citizens speak English. Jobs are moving to countries that are accustomed to working for pennies a day. These layoffs have a large impact on the affected communities, workers not only lose their jobs, but also lose their health-benefits as well. (Hira 22) People who do not get fired are substituted with higher ranking jobs of lower wages and lower benefits. Private corporations avoid environmental restrictions, hour and wage laws, and unions and labor rights with outsourcing. Private corporations avoid taxation by not claming profit in the non-core, outsourced areas. All these factors lead to outsourcing, which leads to job destruction, which leads to an increase in unemployment. (Hira 23)

Outsourcing can be viewed from two perspectives, the top and the bottom. The top being that outsourcing reduces costs to firms, increases efficiency, increases flexibility and adaptability, requires free trade, and requires free capital mobility. (Linder 40) The bottom being that outsourcing raises costs to workers, increased efficiency and flexibility for firms means greater risk of uncertainty, anxiety, stress, and poor health for workers, free trade puts weaker workers