Outstanding Outsourcing Essay

2742 words - 11 pages

Outstanding Outsourcing

“It (outsourcing) is not a our father’s traditional foreign trade. Goods are not being traded. Offshore production is not a case of US making good X and trading it (to another country) for good Y. It is a case of the US ceasing to make X in the US and making it (in another country) instead” (“Outsourcing champs say India critical to their success”). This quote leads to the differences between outsourcing and trade. Trade is a matter that had threatened the unskilled people in the labor force, which encouraged many of them to learn some sort of skill. Unlike trade, however, outsourcing is a threat to skilled workers. It is true that outsourcing had been around for many years and that it is no new matter. Yet outsourcing has gained more attention than ever because of all the recent layoffs and cost-cuttings that the U.S. economy has been suffering through. The option that American companies, specifically the software and IT sectors, have turned to is outsourcing to the Third World countries such as India. Although companies benefit from such activities, do the skilled workers of the U.S. share the same fate? How does the Leak, Match, Trap Theory apply to this situation and can it help predict the outcome? And is India affected by the U.S. outsourcing?
The U.S. is better at providing services. Service workers, such as the computer programmers and electrical engineers, really have no worries about trade and are rather immune to it. In spite of that, outsourcing is like a virus to them. It started with the recession that was gradually creeping up on to the U.S. economy as unemployment was beginning to rise in the late 1990’s. September 11, 2001 only made the situation worse by adding more salt to the wound. The first industry to take the hit was the computer industry since it was the most recent booming industry at the time. The only means for the IT companies to maintain business and to have minimal losses was to transfer their services overseas to India. Nonetheless, many of the people who had lost their IT jobs saw this as a disadvantage since they were the ones who had to either find another job that matched their skills or had to obtain new skills. Along with this, they, along with the majority of the workforce, saw outsourcing as something harmful to the American economy and that it caused increase in cost (Easterls, 166). These outlooks are not necessarily true, however.

It is accurate to say that increase in cost will occur. IT companies need to spend money overseas to India in order to build institutions for training and work facilities, even though the headquarters will remain in the U.S. What's more, promoting their company for jobs and services will cost the IT companies as well. However, this will happen only for the short-run. For instance, the construction is a temporary procedure as well as trying to start the business and have it be familiar to the country. The benefits are...

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