There has been a rise in consumerism due to the emergence of globalization brought about by rapid advancement in information technology. Consequently, a demand for skilful human resources to perform various duties at global manufacturing sites and branch offices has motivated the multinational corporations to outsource their work internationally. Since this outsourcing of work occurs off the shore, it is also called offshore outsourcing. What is the objective of international outsourcing?
Who benefits from outsourcing the work to people in other countries that have different time zones, contrasting cultures, and different languages? What are the barriers to international outsourcing? These are some of the questions that come into the minds of entrepreneurs who want to collaborate to successfully execute international outsourcing. This exploratory essay delves into the concept of international outsourcing by using an unbiased approach that would further broaden its understanding.
Like any innovative process, international outsourcing has been appreciated by its opponents and condemned by its critics. The multinational corporations, such as Pepsi, Coca-Cola, Sony, General Motors, Ford, Boeing, Hewlett Packard, etc. have been expanding their market share by opening outlets in countries across the world. To maximize their profits, they have established manufacturing plants in the remote areas of developing countries like India, China, Brazil, etc. where the cost of production is comparatively lower than in the developed countries like the USA, Canada, Germany, Australia, Japan, etc.
Since the developing countries like India have a large population that is highly educated and can communicate effectively in English language, the corporations in the developed countries continue to outsource the work to individuals, small business firms, and large companies in India. “American and other western nations can have their technical business needs and services provided for them at a discount, while workers in India can reach a global market and improve their economic status” (Arun, 2007).
The companies in rich nations like the USA also save their operational costs and maximize profits by outsourcing to developing economies like India. There is no doubt that international outsourcing creates more job opportunities for people in the developing countries. However, there are critics who argue that international outsourcing also creates unemployment in the rich nations as the work is snatched from the existing employees based in the developed countries. It was reported that “3. 3 million U. S. jobs and $136 billion in wages could be moved to such countries as India, China, and Russia by 2015” (Cyber Futuristics, n. . ).
But how about the jobs created in information technology, shipping and handling, and management sectors of the companies in developed nations, which continue to expand their business operations globally? For instance, if Hewlett Packard expands its business by opening manufacturing plants in India, China, Russia, and other countries, it creates jobs in the manufacturing sector in these developing countries, but it also creates jobs in other sectors, such as information technology, shipping and handling, and management in the country of origin i. e. the USA.
As these multinational corporations make more profits through international outsourcing activity, they get more financial resources to hire more workers in the USA. “Savings from outsourcing allowed companies to create 90,000 new jobs in 2003, with more than one in 10 of them in Silicon Valley or elsewhere in California” (MSN, 2004). There have been advantages as well as disadvantages of international outsourcing, but its advantages outweigh the disadvantages. One of the advantages is that it has created more jobs in both the developed nations and the developing nations.
Secondly, it has enabled the multinational corporations to make more profit and expand their business operations globally, which has provided the consumers different brands of the products that can be manufactured locally at a reduced cost. This has led to an increase in consumerism as the price of finished products has also declined considerably due to the availability of cheaper raw material as well as human resources, and the elimination of massive import duty that the consumers paid before the advent of international outsourcing.
For instance, it can be seen that the price of cellular phones has reduced drastically that has allowed people from different income groups to buy the handset, which they could not afford earlier. Moreover, the governments in both the developed nations and the developing nations also get more taxes due to an increase in the sales volume of the products.
One of the disadvantages of international outsourcing is that it disturbs the normal routine of a worker based in a developing country because of difference in the time zones. However, the diligent workers are ready to work hard to give better standard of living to their family members. Considering the existing success of international outsourcing, it has a promising future as more and more business corporations want to outsource to India, China, Mexico, Ukraine, Philippines, and other developing nations.
Besides achieving a reduction in the operational costs, the multinational corporations claim that they get better efficiency and customer service (Bloomberg Businessweek, 2006). If international outsourcing is changing the lives of the people globally, the governments should make the process smoother by removing the obstacles, such as unnecessary paper work, delay in issuing visas, long bureaucratic channels that cause hassles in clearing payments done in different currencies, etc.
In spite of these hurdles, the hard working professionals in the developing countries shall find the solution to deliver the best services to their business clients located in the developed countries. International outsourcing has also brought the hearts and souls of people with different cultures together even though there may be difference in languages and time zones.