1. Outsourcing: An Effective Strategy By Vida Atchulo

2. Introduction  Over decades, outsourcing has become the topic of debate in all spheres of life. Today’s political campaigns do not overlook this important issue. The stance of this paper however, is to look into the implementation of the strategy.

3. Definition and history of outsourcing vs. comparable strategies  For centuries, outsourcing has been founded on concepts of trade within industries.  Prominence among the British textile industry during the 19th century.  In the 70’s, it became prevalent in the technological companies in US.  payroll  financial administration as a means of streamlining activities  A firm engages in outsourcing when it has an outside entity perform a function (s) for it.  Off-shoring can be the same as outsourcing or not. It depends on who owns the activity. When a firm moves part of its domestic operations to another country, it is termed an offshore activity.

4. Political implications  The phenomenon of outsourcing has created an incentive for politicians to scramble to get ahead of the political curve. For instance, the accelerating trend of foreign outsourcing has contributed to U.S. job losses in recent years, and has become an issue in the 2004 elections, and, as contained in the president’s annual report to congress on the health of the U.S. economy, states that “outsourcing is just a new way of doing international trade” and “more things are tradable than were tradable in the past, and that is a good thing.”  On the contrary, the democratic senator from Massachusetts, a fierce political opponent to president Bush, has consistently reminded voters that more than 2 million jobs have been lost during Bush’s White House tenure. He promises to keep more jobs at home by taxing offshore businesses of U.S. corporations to cover other parts of his tax reform program.

5. Political implications cont...  The biggest concerns about outsourcing always seem to be about jobs and competitiveness.  Research and statistics have indicated startling numbers that 3.3 million U.S. jobs are expected to be lost overseas by 2015, according to a recent report by Forrester Research.  Similarly, according to Deloitte consulting, 2 million jobs will move from the United States and Europe to cheaper locations in the financial services business alone.  Frontline World reported that over half of the fortune 500 companies have moved jobs offshore, including famous names such as Oracle, Dell, HBSC, Delta Airlines, Novartis, J.P. Morgan Chase, Hewlett Packard, American Express, and more are expected to follow.

6. Political implications cont...  Projected numbers of U.S. jobs to move overseas by 2015 in various fields are as follows:  Management288,281  Business348,028  Computer472,632  Architecture184,347  Life Sciences36,770  Legal76,642  Art, design29,564  Sales226,564  Office1,659,310  *Source: Forest Research Inc. Nov. 2002

7. Benefits  Improved efficiency is one of the most important reasons for which an organization would decide to outsource.  Access to experts and specialists is another reason for which firms choose to outsource some of their functions.  Outsourcing is a good way to achieve better control over difficult or complex functions.  Outsourcing allows a company to improve its morale and focus.  Outsourcing frees up the business to let the company focus on its strengths.  Another great benefit that can be achieved through outsourcing is the reduction of capital expenditures.  Outsourcing is also a good way to utilize resources that are not available internally.  Not only developed countries gain advantages from outsourcing, but also developing countries do.

8. Criticisms  For just about every benefit of outsourcing there is equal an offsetting criticism. In fact, what can appear to be a benefit can turn into a criticism, depending on the business case and implementation process. This dichotomy can make it difficult for businesses to make the correct decision whether or not to outsource.  First and foremost is a joint criticism of outsourcing, shared by management and consumers, the concern that the quality of performance of the outsourced service will not meet the level of expectations that the company performed and the customers grew accustomed to.

9. Criticisms cont.  A second multi-pronged criticism of outsourcing involves the negative impact on work, labor, and the economy. From the perspective of U.S. citizens, the criticism revolves around the exorbitant costs required to transfer control of the labor process overseas to another business. According to 1,000 Americans polled in August of 2004, by Zogby International, 71% of Americans believe that outsourcing jobs overseas hurts the economy, while 62% believe that the government should impose legislation against the transfer of jobs overseas.  According to Business Week, one out of three private-sector jobs are at risk. Outsourcing is now occurring at a breathtaking pace. Once work becomes routine, especially service work, it can potentially be outsourced. There are numerous estimates on how many jobs are being lost and will be lost in the future to outsourcing. The associated threat to labor impacts the work force psychologically and is evident in worker insecurities and fears over losing jobs.

10. Conclusion  Outsourcing can increase efficiencies in cost, quality, service, and speed which, in turn, frees up time for companies to focus on their core competencies and future strategy. However, outsourcing is not always implemented successfully. When a company outsource functions, it still has a responsibility to the public to remain a going concern. A company should choose wisely when determining which functions should be outsourced and understand that cost savings aren’t always recognized. If a company follows the steps to successful outsourcing and choosing the right business partner which it can trust, odds are in its favor that it can reap all of the benefits to outsourcing. Outsourcing is an effective strategy when implemented properly.

11. Questions & Comments