The Impact Of Outsourcing Essay

1919 words - 8 pages

Outsourcing has only very recently become an issue in the United States, and as a result it has become a very popular political issue during campaigns for presidency. Outsourcing is the idea that a company will subcontract to a third party, usually outside of the US, for various parts of its business structure. An example of this and perhaps the largest source of outsourcing is call centers for tech support, where a company will subcontract to a third party and that party will build up the call center and hire the workers for it. Many people have been affected by outsourcing since it started being used widely in the 1980s, and most would argue that outsourcing is not a good business model, that while it not only negatively affects them, it affects the whole economy. While there are some unmistakable positives to outsourcing, I would argue that as a whole, the negatives far outweigh the positives and outsourcing is bad for the United States.
There are many benefits to outsourcing, many reasons that company has to outsource some of its business. According to Robin Gareiss, “The No. 1 reason companies turn to outsourcers is to save money--64% say that’s the main goal of their outsourcing contracts” (3). Companies are able to save money because they outsource to another country, and the third party that is in the outsourcing contract, runs the business in that country and is able to pay wages in accordance with that country’s laws, which for the most part there are none. The business usually outsources to a developing nation, and as a result can pay much, much lower wages than if it were to stay within the US. This cost-saving idea has become a much strong reason for outsourcing since the economy has been in a recession, as companies are looking for any way possible to cut costs, in effort to keep the company safe from bankruptcy. While cost-cutting is said to be the biggest reason for companies to outsource, it would seem much less legitimate, if there was no other reasons for a company so subcontract to a third party abroad.
Businesses have various other reasons for outsourcing, that while they may prove to be beneficial to the company, they often take a backseat to the cost-saving reason, as they may not be nearly as apparent. One reason that may be tied to the cost-saving idea is that many countries will offer tax incentives to move manufacturing operations, which counter the high taxes of another country, such as a US manufacturer moving to a developing nation. They may offer a tax incentive because they are offering jobs which a developing country needs. Another benefit some companies will see is the improvement in the quality of their product because they are contraction out to a third party that specializes solely in that product. This is related to the second highest reason that companies outsource; operational expertise.
When a company contracts to a third party abroad, it is looking for the expertise that would...

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