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Outsourcing

"Outsourcing" became a popular buzzword in business and management in the 1990s. It was a welcome addition to the business vocabulary as, prior to the introduction of the term, the domestication decision involved a decision to either produce in-house or a decision to produce outside. Introduction of the terms outsourcing and out-tasking gave managers much-needed words for external production.

Outsourcing and out-tasking involve transferring a significant amount of management control to the supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust.

The concept started with Ross Perot when he founded Electronic Data Systems in 1962. EDS would tell a prospective client, "You are familiar with designing, manufacturing and selling furniture, but we're familiar with managing information technology. We can sell you the information technology you need, and you pay us monthly for the service with a minimum commitment of two to ten years."

Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Outsourcing business is characterized by expertise not inherent to the core of the client organization.

A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business.

Table of contents
1 The international context
2 See also
3 External links

The international context

With the rise of Globalisation, many companies are turning to either offshoring or offshore outsourcing. Offshore outsourcing more and more takes the shape of Business Process Outsourcing, where whole business processes (such as support and development) are outsourced. The client is usually free to choose who provides the outsourced business processes, while stock markets press the company to do more for less. This requires that managers search out the cheapest sources they can find. In countries like India and China, companies like IBM, Microsoft, Hewlett Packard, and Novell choose to get services from sub-contractors in these countries or move many development and support jobs there. Smaller businesses can also take advantage of freelancing on the Internet to get smaller projects done by offshore developers at minimum cost.

This practice became even more popular after the dot-com crash of the early 21st century. As many businesses struggled with cash-flow problems, many investors were leary in investing money in high-tech companies, which many felt were still vulnerable to the dot-com effect. Struggling to do more with less, companies looked for less expensive avenues of development and support. For the United States, India seemed like a perfect resource for these needs since most nationals spoke English—a side-effect of several decades of British colonial rule. A company can hire an engineer in India, for example, for US$10,000 a year where an equally qualified engineer in the U.S. could cost $60,000-$90,000 a year.

A side effect of this practice led to the domestic unemployability of thousands of high-tech professionals, many of whom were new college graduates. Many of thes new graduates studied high-tech fields specifically because a few years earlier, they were told there was an earnest need for people with the skills they actively acquired. Many companies required their employees to train their off-shore replacements, after which they were downsized (laid off). In one unfortunate case, a Bank of America programmer committed suicide when forced to train his Indian replacement.

In practice, this trend has experienced mixed results. Some companies, which were required to hire off-shore talent by investors, reported communication barriers and high foreign personnel turnover rates. They would often ask for one thing, but be delivered a different item. A domestic correspondent may have dealt with a foreign counterpart for weeks, only to find he had left the previous day (with no notice) and was replaced with another individual, who would then need to be briefed on the current development and projects. Several companies also complained of the low quality of the work produced by Indian development teams.

Reaction by some US customers has also been negative. Many customers of Dell complained of an inability to effectively communicate with their support staff, which Dell outsourced to India, because of their heavy Indian accents.

Other companies report favorable results, however. One company said that the low cost of his Indian development team allows him to hire higher-paid American lead developers.

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Who Moved My Job?
Weblog-style presentation of information and links about corporate outsourcing.
http://www.whomovedmyjob.org/whomovedmyjob/blog.asp

Stop Offshoring
Collection of links to websites opposing offshoring of American jobs or discussing the issue.
http://mikewhoo.tripod.com/TU/

Your Job Is Going To India
Examines the effect of globalization on IT careers, offers forum, FAQ, book and website reviews, and career help.
http://www.yourjobisgoingtoindia.com/

Who's Outsourcing?
Discusses economic impacts of offshore outsourcing on the U.S. economy and provides links for activists to send messages to Presidential candidates, elected officials, and corporations involved in the practice.
http://www.whosoutsourcing.com

Buffalo Moves Closer to Extinction
Article from the Guardian examines the impact on Buffalo, NY, of the loss of manufacturing jobs to other countries with lower wages.
http://www.guardian.co.uk/usa/story/0,12271,1089065,00.html

Jobs Migration Moves Relentlessly Up Skills Chain
Guardian article on the loss of jobs from the US and Britain to the Far East, not only in manufacturing but also in fields such as accounting.
http://www.guardian.co.uk/business/story/0,3604,1088989,00.html

Job Migration is Draining Silicon Valley
Stanley Accrington of the Mercury News comments on the export of information technology jobs.
http://www.siliconvalley.com/mld/siliconvalley/business/columnists/4310498.htm

Globalization News and Commentary
Expresses views on outsourcing and other globalization issues. Includes current headlines, letters for polititians, and issue specific topics.
http://www.gnp.org

Lost American Jobs
Discusses the trend towards outsourcing many company functions offshore into areas such as India and the Philippines or near-shore into countries such as Mexico and Canada. Displays manufacturing and information technology forums for discussion.
http://www.lostamericanjobs.com

CNN Programs - Lou Dobbs Tonight
Conducts an ongoing series under the name "Exporting America" on US companies outsourcing jobs.
http://www.cnn.com/CNN/Programs/lou.dobbs.tonight/

No Jobs for India
Read about companies that outsource and the issues surrounding this growing trend. Report companies and situations that you may have seen in regards to outsourcing.
http://www.nojobsforindia.com

InSource America
Information resource for those concerned with the growing offshore outsourcing trend in the information technology and service industries. Displays current outsourcing news, links to related resources, and online surveys.
http://www.insourceamerica.org

Outsourcing
Offers news, information, and opinions about the subject of outsourcing. Find a discussion forum, polls, current headlines on the topic, and a newsletter.
http://www.outsourcing.org



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