What is Outsourcing?

Outsourcing involves transferring or sharing management control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Such a relationship between economic entities is qualitatively different than traditional relationships between buyer and seller of services in that the involved economic entities in an "outsourcing" relationship dynamically integrate and share management control of the labor process rather than enter in contracting relationships where both entities remain separate in the coordination of the production of goods and services.

Why Outsourcing?

• But now outsourcing is a $400 billion a year industry and the world cannot afford to ignore it. Globalization, explosive growth of Internet, and the development of information society in every region of the world has made outsourcing an integral part of the world economy.
• Increasing globalization, rising cost of production in USA, and lower costs in developing countries.
• Growth strategy, competitive pressure.
• Access to qualified personnel, access to new markets.
• Improved levels of service, Increased speed to market.
• Depleting IT Talent Pool in USA
  
  To understand why outsourcing is happening we must realize that the USA has a fast depleting talent pool in technical fields like Computer Science and Physics. So the companies are forced to seek talent outside the country or to send the job to country where there is a large talent pool. The report "Inside the Debate over Outsourcing Information Technology Service Jobs Overseas," published by Manufacturing News, talks about the issue of talent shortage in America.

Risks In Outsourcing

Security Risks In Outsourcing

It was reported on the BBC by Zubair Ahmed that some employees of Indian call center Mphasis in Pune transferred large sums of money to the fake account they created from the accounts of American customers of Citibank, whose call operations were handled by the company. This incident has brought into focus the lack of integrated security management system in India's call centers.

Social Effects of Outsourcing

In article "The Politics of Business Outsourcing", Kaushik Basu says that job loss due to outsourcing may lead to protectionism and nativism. In the long run this can lead to racism and other discriminatory practices. So it's very important to help the laid off workers so that they do not develop these kind of feeling toward the country where his job went. (Basu, 2004, p.9)

Unions Opposing Outsourcing IT

Unions in America have looked at one side of the social effects of outsourcing — job loss and the effect it has on the family and society. They are protesting against outsourcing and pushing the Government to pass laws to ban outsourcing. Although there is a general fear of outsourcing among the public, we believe that if we are able to create a mutually beneficial outsourcing relationship between the two parties and show the benefits to the people, they will begin to feel positive about it.