For a couple of decades or more now, increasing numbers of United States companies have been making the smart move of outsourcing various work segments to India, China, Ireland, the Philippines, and several other locations. In the early days of these endeavors, many stateside sectors cried foul on the basis that these maneuvers were unethical, inappropriate, and damaging to the US economy.
Less knee-jerk reactionary minds prevailed. The counterpoint was made that capitalism means business owners are free to engage vendors wherever and however they so choose, provided those choices are legally allowable. The business owners decide how to run the business and who to hire.
In 2005, Thomas L. Friedman wrote his famous book, The World Is Flat: A Brief History of the Twenty-first Century. In it, he fully analyzes all angles of the outsourcing movement.
Friedman makes a compelling case based on business globalizations irreversibility. Simultaneously, Friedman demonstrates compassion for those negatively affected by outsourcing. He explains:
The great challenge for our time will be to absorb these changes in ways that do not overwhelm people but also do not leave them behind. None of this will be easy. But this is our task. It is inevitable and unavoidable. (pp. 46-47)
Now that we have been outsourcing for a long time, an interesting development has been occurring. As business globalizations irreversibility continued, various countries began to prosper as a result. For example, Chinas workers wages have risen about 15% per year for the last decade. Similar trends are occurring in India and other typical outsource locations. Although this is good for China and India, it makes the outsourcing deal less desirable for the US.
Finally, outsourcing costs and benefits are more than meets the eye. Having a worker in Bangalore at $3.00 per hour looks quite compelling compared to a stateside union worker at $30 per hour. Nevertheless, having been on many international conference calls to manage outsourced vendors, I know from personal experience that all kinds of hidden costs eventually add into the situation. You sometimes expend significant resources just managing the process when your charges are separated by half a world. Quality control can be a challenge given the distances, and international travel isnt cheap. Increasing fuel prices dont help either.
The current issue of Bloomberg Businessweek has an excellent article on these developments (link below).
Exactly how these arrangements continue to evolve will largely be market driven. Outsourcing is not always the best solution. More labor force adjustments will occur in all affected nations. Business partnerships will likely become more diverse and unique as all parties continually aim to strike the deals that make the most sense (and cents) for them. And all of us will do well and prosper when we wake up and realize its a whole new world out there. Indeed, the world is flat.