Overseas Business Sailing Away

Friday, June 1, 2012 at 8:44pm by Sandy Jones

The battle over limited jobs right now is already intense, but one factor that has remained largely overlooked is that of outsourcing. Not only are Americans competing against each other for the handful of jobs available, but in addition, jobs are being sent overseas to other countries. Although this sounds like an obvious problem with an obvious solution, you might be surprised to find out that studies have proven conclusively that outsourcing can actually benefit everyone in the long run.


What is Outsourcing?

When a company in the United States hires employees overseas to do a portion of their work for them as opposed to giving the jobs to Americans, the process is called “outsourcing”. In 2011, a total of 2,273,392 jobs were outsourced to other countries and nearly half of those were to reduce or control costs, according to recent numbers from Sourcing Line Computer Economics. India currently ranks highest as the top-rated outsourcing country.

Although there are many myths about the disadvantages of outsourcing, looking at the actual facts will help give you an idea of exactly what there is to gain from the situation.


Why Outsource?

There are many reasons large companies choose to send their work overseas to foreign workforces, but here are the most common ones:

  • More for less: To put it simply, there is an abundance of foreigners overseas willing to work for substantially less money than Americans. Because companies can pay lower wages and cut the cost of benefits, it serves as a huge incentive for them to export their work to other countries. Saving money is the primary reason companies outsource.
  • Increased productivity: When basic data entry or IT support is sent overseas, it frees up internet usage, manpower, and other resources that allows a company to devote more energy and focus to more specific, technical areas. Furthermore, it allows them to get a mass amount of work done in a short amount of time if they hire temporary employees to focus on one specific area at a time.
  • Boosts economic activity: The IHS released a study in 2005 outlining exactly what benefits arise from outsourcing. Contrary to popular opinion, outsourcing does not have an overall negative effect on jobs in America. Rather, it actually adds jobs because of the economic activity it generates. At the time the report was released, worldwide sourcing of IT-related software and services added 257,042 jobs in one year.

    Because of the amount of jobs sourced-out, inflation was maintained at a lower rate while still keeping productivity high. This in turn increased the actual hourly wages for U.S. workers. More importantly, the activity overseas generates products and services that other countries purchase from us, which boosts the economy as a whole significantly.


Types of Outsourced Work

At this point, you’re probably wondering what kind of work is actually sent outsourced. In general, most of the work that is outsourced relates to Information Technology (IT) and call center support. However, a recent article by the New York Times highlights the growing trend of using outsourcing for a variety of specialized work.

Drew Smith, a musician trying to make a living, needed a music video for one of his songs but was short on cash. Taking ingenuity to the next level, Smith decided to outsource the project to Bangalore, India to give it traditional Bollywood-style movie magic. The video for his song “Smoke and Mirrors” was not only cheap to make ($2,000) but it was actually quite popular. In 14 days, the video was viewed more than 180,000 times.

Other unique areas of work that have received attention in the world of outsourcing were on a larger scale. IBM Computers, the leading U.S. computer manufacturer, contracted an order for a microchip design from an Indian company that required significant expertise.

The important lesson to take away from these examples is that Americans are learning to experiment and test the abilities of overseas workers. Overall, it becomes clear that the benefits of outsourcing definitely outweigh the costs and being afraid of the myths is an unwise evaluation of the facts.

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